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August 01, 2012

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NoNameRequired

Most likely of the above: None of them.

Nokia is just too much of a poison pill for anyone to swallow. The secret deals made with Microsoft and the patent trolls rule out any hostile take-over. Samsung, Google, Apple, and possibly even Microsoft, would also fear the regulatory process that follow such a purchase. Apple and Samsung would likely be denied, or tightly regulated, like with the Nortel sale, since they already control such a huge slice of the market.

Nokia's old competitors are already getting what they want the most for free: The know-how and engineering talent, which is fleeing Nokia as fast as they can send out their CVs.

Most likely buyer: An investment company nobody has heard about before. It can slice up the company, and tear up contracts far more freely than any of the above mentioned companies would dare. Then the investment company can sell the pieces unencumbered. But why buy now? The share price is still dropping.

ejvictor

no need for this post - Nokia marketing strategy will revive lumia sales to the point where it will overtake Apple for number 2 spot.

http://www.gsmarena.com/nokias_latest_bid_to_boost_the_lumia_900_sales_involves_nail_polish_-news-4595.php

Yes nail polish!

m

I bet the "support payments" from MS that add up to slightly more than nothing when offset by "minimum royalty commitments" according to Nokia's SEC filing about the MS deal, would be required to be paid back if the deal were broken.

All of that money which only existed on paper, would suddenly be real, because MS wouldn't have to pay back the so-far $1 B worth of WP royalties (67 million phones' worth... cause you know, Lumia should be outselling iPhone by now according to the plan).

Even if the deal was ruled to be made in bad faith and no breakup fee was awarded, MS may claim that the fake support payments were real costs that can be recouped???

Elop destroyed and poisoned anything at Nokia that was of value to anyone but MS.

Kenny

Tomi,
You wrote that WP phones is not suitable in Africa and much of the Emerging World where phones are unsubsidised, and consumers do not have PCs, use Xbox 360 or Zune or have any accounts with Microsoft services. You forgot to mention that WP phones need a data connection to do simple things like transferring files and contact backups. Zune will not transfer any files other than photos, music and video, all other files need to use SkyDrive. WP phones also terminates the wi-fi and reverts to 3G for notifications and backup transfers when it sleeps. So WP phones need a data connection to be useful which is just not optimal in developing countries where users still depend heavily on bluetooth file transfer. It is really no point for Elop to talk about making an extra cheap Lumia for the 3rd world when the OS has been designed for users in rich Western countries where data is cheap, fast and widely available and everybody have data plans.

Oh, btw, Zune will not even install on a PC without an internet connection.

Baron95

First of all Apple, Samsung, ALU, Ericsson, Huawei and a few others would never ever get regulatory approval to buy Nokia - so it is useless to even mention them.

Second, Nokia is trading at a valuation that is slightly more than net cash. So the entire enterprise is valued at zero, as it should be.

Third, Nokia reports its patent royalties, and it totals, from all companies, about $600M/year. No, Tomi, they don't get $2B from Apple alone. Nokia's valuable patents are mostly under FRAND, several of the patents have been sold, and pretty much everyone has cross-licensed already. They are not that valuable for the players you listed.

I think you bring up a good point on the very large operators being an "outside the box" buyer candidate.

In the end though, Nokia is a toxic asset. It needs to be "detoxified" before a sale. Elop needs to split Nokia into a good company and a bad company. All the toxic assets - NSN, factories, worthless deadwood employees with their pension liabilities need to be put into "BadNokia". Brand, handset design, handset R&D, operator contracts, Navteq, cash, patents need to be put under "GoodNokia".

BadNokia would be left to swim or drown on it's own.

GoodNokia would complete the transition to WindowsPhone 8 + Asha + S30, then be put up for sale.

It is no mystery. Just follow Sanjay Jha's playbook for Motorola.

Mark

IMO the one that stands out as a good match with minimal overlap is HP. pre-Carly HP was like the old Nokia, a rock-solid engineering driven company. HP has a big enterprise market including computer networking and servers; so IMO it would make sense for them to keep both NSN and Lumia, while also offering other OSes on the same mobile hardware platform. Is there enough of the "HP way" left in its culture to repair the damage done to Nokia engineering?

But on the whole I agree with Tomi's view that HP is "once bitten, twice shy" when it comes to mobile acquisitions... Also I worry that HP is itself too damaged by greed to live through the pain of such an acquisition, and too self-important to not spoil the good bits of Nokia by assimilating it too fast and forcefully.

J. Hacker

Hello Tomi

Unrelated to this article, but you might want to read this:
http://www.phoronix.com/scan.php?page=news_item&px=MTE1MTc

It was shared on the Qt development list that Nokia is about to sell of any remaining parts of Qt it has.

elm70

Timo ... since when you are looking of the stock price of Nokia ?

You post many time you did not care about it ;-)

Anyhow, I don't agree with your view over NSN.
NSN right now is the best unit of Nokia. All other units are making losses.

Nokia Dumbphone unit is going to get more and more under pressure by cheap Android. Feature phone will not exist in the future ... you are the first to predict that there is a migration from normal phone to smartphone ... so the future of Nokia Dumbphone is the death.

Yes, they could be cheap smartphone ...but ... Meltelmi has been closed down, S40 is getting old like it was S60 and S3 before in the other segment.

Finally ... you seam to believe a take over action is going to happen over Nokia ... if you are right, for sure the Nokia BoD is aware of it, they have been approached by some buyers ... so this inside buying from Nokia BoD, over 1 millions of share ... is again ... another prove that Nokia CEO, Nokia President and all full Nokia BoD are a bunch of CRIMINALS ... why Finland does not send police and investigator to check Elop ? His doing in Nokia has been looking illegal since 11.2

Tchuss

e_lm_70

elm70

>> Remember, just Apple alone pays Nokia in the tune of between 1 and 2 Billion dollars per year in intellectual property fees <<

Tomi ... I was telling you already, this is totally WRONG.

You can read in the Nokia Q2 2012 PDF ... Nokia expect only 500m Euro of IPR per year.
Either you know more and Elop and Nokia are telling lies ... or your sources are wrong.

Tchuss

e_lm_70

ps: Excluding last balance where Nokia state it got 400m in IPR, but they say this include in advance payment for the rest of the year ... in the Nokia balance was never visible nothing more then 100m € in IPR (IPR are hidden inside different voices, for keep Nokia non-transparent and allow Elop Crime to be more easy)

foo

What if Microsoft hand-picks a PC manufacturer to take the poisonous Nokia pill?

Microsoft could offer cheap Windows and Office licenses to that PC manufacturer, which would be an immediate strategic advantage against all other PC manufacturers.

Example:

Lenovo buys Nokia, and receives free Windows and Office for the next 5 years. All the other manufacturers need to pay Microsoft $250 to distribute the same software, which makes a *huge* difference, when the laptops cost just $600.

Lenovo wins.

Nokia wins.

Microsoft wins.

All the other PC manufacturers loose.

The fact is that Windows and Office can cost as much (or as little) as Microsoft wants, so they can do that.

They can use their software to leverage any operations they wish.

vladkr

Hello Tomi, glad to see you're alive ;)

Is it stupid to think that a potential Nokia buyer wouldn't be an IT one ?
I mean, would it be surprising if Middle-East investors or companies like Tata of India tried to buy Nokia ?

Tata for instance is (at least seems to me) quite a big company, which offers quite a wide range of services, from cars to food, not to mention heavy industry and chemicals. They could be interested in adding a branch to their mega-group.

Same thing about Middle-East investors; if they're able to buy soccer teams, most desirable buildings in European capitals, media, etc. just to prepare the "after oil" period, why wouldn't they try to buy a former Telecom giant?

Again, it may be stupid, I'm far from being a specialist, but I think it would be an interesting case.

By the way, you say that Nokia is the biggest dumbphone maker. As I recently found out that many dumbphones (Nokia 1280, 102, 103 and certainly much more) are made by other companies (ie. Sky mobile in India), what dumbphones... what phones do Nokia still manufacture itself ?

Baron95

@Foo - you do realize that everything you are proposing is illegal, right? Microsoft is regulated by a consent decree and cannot offer discriminatory pricing for Windows to PC mannufacturers.

Microsoft does not have a need to buy Nokia. They can offer incentives (marketing $$$, use of Navteq, etc) to get what they want.

If Nokia was to be split off, like I mentioned above, then a lot of people, including Microsoft would be interested in the good part. But the bad parts, including about 50,000 excess people are a huge drag. Much better to pick the assets in bankruptcy, like Nortel and Kodak.

MikaA

@elm

Now that Elop and Siilasmaa have bought shares, and if there happens a bid-off competition soon afterwards, I think that they cannot get away out of that one without a criminal investigation. Not even in Finland. This could be a way to increase the stock value of the company before Q3. It is hard to say at the moment, since both of them have had less shares in the company than recommended. Their current amount of shares is still below the earlier recommended levels.

For me it seems that Microsoft is starting to lose ground with Windows 8. Valve has launched a Linux version of Steam, that move is probably monitored by other software entertainment companies very carefully. I suspect more pressure is building up towards Microsoft. The positive development is that the preliminary pricing information of Windows 8 states that it would be very cheap. It all goes down on what sort of restrictions have been built in Windows 8, and what sort of Office package is released with it. Microsoft still hasn't got over the backslash they got from changing the user interface in Office and doing that once again with desktop UI and Office package is not going to win them friends among hardware industry.

John Phamlore

Sorry Tomi, Nokia does not have the best patent portfolio in the business. It's Qualcomm. Remember them? They're the company Nokia surrendered to the day the Nokia died:

http://www.nytimes.com/2008/07/24/technology/24qualcomm.html

It's not the royalties that Nokia agreed to pay that's the biggest part of the surrender, it's this:

"As part of the settlement, Nokia said it had agreed to withdraw a complaint it made to the European Commission against Qualcomm and assign ownership of a number of patents to Qualcomm."

And about the time of the surrender by Nokia, Qualcomm fully unveiled its plans to sell an entire SoC wireless solution including ARM-based processor and even graphics. Observe that even Samsung has to modify its Galaxy SIII for the US market to use Qualcomm's processor solution, not the one that Samsung itself is developing.

geektech

Hey Tomi, what do you think about this?
http://www.theregister.co.uk/2010/07/22/nokia_manifesto_risku/page4.html
Poor Nokia it just need some improvements and
become so damn!

Omar Moya

Hi Tomi,

Great analysis as usual. Some of your points are arguable, but I think it makes sense to mention that most analysts think that Samsung is interested in NSN, as infrastructure vendor. Samsung is investing a lot in their networks division and are trying to become top3 by 2015. In order to reach that spot they need some help. They can't do it growing organically... at least not that fast. An acquisition would be the only way to do it, and NSN would be a possibility, IMO.

Chris Hanlon

What I would love to see is Google broker a joint venture with all its Android partners.

Set up a new umbrella entity to run Nokia that they jointly own.

As Tomi pointed out recently when breaking down how bad Lumia sales likely were you cannot expect to take 100% of the market. If you are part owner of the second biggest major platform you still make a percentage on the part of the market that they're never going to control with your primary products.

And then you can beat Nokia, Microsoft et al to a bloody pulp with a gigantic shared patent pool managed explicitly to aggressively destroy those that want to 'innovate' in the courtroom.

SVE

Hi, this was a very long post! I have been interested in the smartphone market for the last several years as it has jumped up and become the fastest growing way that people access the internet (it used to be only computers). I came across your website from other web references mentioning your good phone industry statistics. I have only one question: who is Nokia?

chithanh

"And there is not much synergy between manufacturing handsets and the networking unit, so for most buyers interested in one, they would probably need to get rid of the other."
Actually there is some synergy. You can properly test your hardware before it goes on sale. Harald Welte wrote about this when to his surprise an Ericsson engineer showed up at an Osmocom User Group meeting:

http://laforge.gnumonks.org/weblog/2012/05/07/#20120507-berlin_osmocom_meetings

AtTheBottomOfTheHilton

Microsoft must buy certain assets from Nokia in order to secure the product and services they have publicly promised. These are the Navteq mapping services, recently acquired Scalado (which was aquired for the needs of Microsoft), the imaging technologies of Nokia, all the patents of course and many more that I don't know or think about right now. Basically, any asset that is of value to Microsoft so that they can continue making smartphones of their own. If Nokia is alive, Microsoft cannot secure these assets in the long term and therefore Nokia must die so that Microsoft can claim ownership of these.

What is obvious is that Microsoft doesn't really need the production capability of Nokia, only bits and pieces of their intellectual property and supplier relations. In the meantime Elop is doing what he can to kill Nokia, deliberately. NSN isn't killed off that easily and it will probably be sold to someone else. The dumb phone business will be terminated as Nokia goes bankrupt.

Nokia MUST die so that this can go undetected passed regulations. That is the plan.

cycnus

@John Phamlore

Samsung use Qualcom chipset in north america and south korea because qualcom is the only company that offering CDMA+LTE baseband.

Whereas the rest of the world that use GSM/WCDMA+LTE, could use samsung CPU.

eduardo

This question is too hard to think about. Nokia has so many parts, there are so many legal, technological and financial considerations, important pieces are secret, and there are so many possible deals. It seems to me you would need a whole team of M&A specialists to figure out what would be best.

u1w1e

While there are many good reasons to take over Nokia, Nokia headcount is much to high for any future scenario. Nokias headcount is much higher then Apples, Googles and even Microsofts. I believe Nokias headcount is appropriate for the old Nokia with a 30% to 40% market share. What Nokia or any potential buyer needs to do is to slash a number as high as 80.000 of their payroll of currently 120.000. It by the way is no problem to fire 80.000 employees in countries with protective labour laws if a company is approaching bankruptcy. Think of all the european steel companies. If Microsoft or any other bidder takes over Nokia, it will cost billions to retrench Nokias engineers.
... and I think this is not just about money.
I agree with Tomi, that Nokia fits extremly well into Huawei's and ZTE's business. But these companies are run in a state capitalism. It would ultimatly be a chinese government decision for one of these companies to take over Nokia and it is very much against the chinese economic interrest to create further precedents, of chinese companies taking over western companies and then laying off half of their workforce.
MSFT, Apple, Google ... may have similar considerations - not due to government control - but simply to protect their public image.
Most of the companies can by the way do very well without Nokia. Huawei and ZTE for instance will do very well with their handsets. They are ideally positioned in the biggest and still fast growing smartphone market and maybe they already are the best at providing cheap androids. In tenders for new generation networking infrastrucures Huawei and ZTE will continue to undercut prices, with very competitive technologies (and maybe a little bit of chinese government support as well) until NSN and Erricsson will just have to give it up. Actually I believe Huawei and ZTE make NSNs business in 2 - 3 years totally unviable and any potential buyer knows it. For splitting off NSN, Nokia will not receive money, they will have to pay.
The above mentioned companies will all have calculated this and even hedge fonds that do not have to worry about their public image, will have calculated the well known assets of Nokia, but also the costs of liquidating many of Nokias operations.

Winter

If Nokia goes bankrupt, all contracts are torn up. That may take another year.

JollaTyhjäPolla

I have seen some nokians buying new cars here in Oulu after getting the severance package. So it must be rather hefty lump of money!

Share price is going up because demand is high..someone is buying Nokia stock at large volumes...who is it...??

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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