(B)(N) NOK Nokia Corporation ADS

Deal Book. “Two years after hitching its fate to Microsoft’s Windows Phone software, Nokia collapsed into the arms of the U.S. software giant [today], agreeing to sell its main handset business for 5.44 billion euros ($7.2 billion)” – Reuters, September 3, 2013, Microsoft swallows Nokia’s handset business for $7.2 billion.

Nokia Lumina 620
Courtesy: Nokia Corporation

The purchase is petty cash for Microsoft, which has about $70 billion in cash in its offshore accounts, and looks like a replay of Google’s $12.5 billion purchase of Motorola’s dying smartphone business to acquire its patents and start a full-fledged smart device business.

Moto X
Courtesy: (My) Rogers

Google-Motorola rolled out its first handset, a mid-range feature-rich Moto X, in the US last month, but it is also expected to roll out similar devices with regional features and prices for the burgeoning international market.

Nokia is still the world’s No. 2 mobile phone maker behind Samsung, but it is not in the top five in the more lucrative and faster-growing smartphone market that is dominated by Samsung and Apple, and the emerging Chinese vendors  ZTE, Huawei and Lenovo.

Despite all of this, we’re still waiting for the really smart phone that works everywhere, all of the time, is indestructible, and never needs to be re-charged. In the meantime, the industry is dominated by consumer tastes and a breathless marketing industry that churns telephones like fast food and the now defunct cigarettes, and engages the industry of 100’s of thousands of workers at every level, and challenges the budgets of billions of customers world-wide.

Nokia’s fall from grace took just two years (please see Exhibit 1 below) and in 2007 it was trading at $30 and was the Number 1 maker of telephone handsets with a 35% share of the world market. Today, its debt is rated as a “junk bond” and consumes 2/3rds of its balance sheet.

Exhibit 1: (B)(N) NOK Nokia Corporation ADS – Risk Price Chart

(B)(N) NOK Nokia Corporation ADS

Nokia Oyj is a manufacturer of mobile devices, which makes devices for all consumer segments and offers Internet services that enable people to experience music, maps, media, messaging and games.

(Please Click on the Chart to make it larger if required.)

From the Company: Nokia Corporation operates as a mobile communications company worldwide. It operates in three segments: Devices & Services, HERE, and Nokia Siemens Networks. The Devices & Services segment offers feature mobile phones and smartphones consisting of the windows phone operating system; and spare parts. The HERE segment develops a range of location-based products and services for consumers, platform services, and local commerce services for its feature phones and smartphones, as well as for other device manufacturers, automobile manufacturers, application developers, Internet service providers, merchants, and advertisers. This segment also provides content and business-to-business provider of map data to NAVTEQ’s customers; and focuses on the development of content, the platform, and applications. It offers a suite of location applications, such as HERE Maps, HERE Drive, HERE Transport, and HERE City Lens. The Nokia Siemens Networks segment provides telecommunications infrastructure to the mobile broadband market. This segment offers a portfolio of mobile, fixed, and converged network technology, as well as professional services, including managed services, consultancy and systems integration, deployment, and maintenance services to operators and service providers. The company sells its products to mobile network operators, distributors, independent retailers, corporate customers, and consumers. Nokia Corporation was founded in 1865, has 90,000 employees, and is headquartered in Espoo, Finland.

Microsoft is eligible for the Perpetual Bond™ under the premise that the stock price and risk price more or less track each other. Our estimate of downside due to the demonstrated volatility of the stock price is minus ($2.50) per share, and the company is expected to pay a dividend of $7.6 billion to its shareholders this year for a current yield of (an exciting) 3%, almost like a “bank” or “utility” in the old technologies.

For more information, please see our earlier Post, Microsoft, Apple, Google & The Tech Wars.

Exhibit 2: (B)(N) MSFT Microsoft Corporation – Risk Price Chart

(B)(N) MSFT Microsoft Corporation

Microsoft Corporation is engaged in developing, manufacturing, licensing and supporting software products, services and entertainment, and device hardware products.

(Please Click on the Chart to make it larger if required.)

From the Company: Microsoft Corporation (Microsoft) develops, licenses, and supports software, services, and hardware devices worldwide. Its Windows division offers Windows operating system; Windows Services suite of applications and Web services, including Outlook.com and SkyDrive; Surface RT and Pro devices; and PC accessories. The company’’s Server and Tools division provides server software, cloud-based services, and solutions; and training and certification to developers and information technology professionals; and builds standalone and software development lifecycle tools for software architects, developers, testers, and project managers. Its products include Windows Server operating systems, Windows Azure, Microsoft SQL Server, Windows Intune, Windows Embedded, Visual Studio, System Center products, Microsoft consulting services, and Premier product support services. Microsoft’’s Online Services division offers online information and content, including Bing, Bing Ads, and MSN. The company’’s Microsoft Business division provides software and online services, such as Microsoft Office system consisting of Microsoft Office, SharePoint, Exchange, Lync, Yammer, and Microsoft Office project and office Visio; and Microsoft Dynamics business solutions, including Microsoft Dynamics ERP and Dynamics CRM, as well as Microsoft Office Web Apps and Microsoft Office 365, which are online service offerings. Microsoft’’s Entertainment and Devices division offers products and services designed to entertain and connect people. Its products include Xbox entertainment platform, including Xbox 360 gaming and entertainment console, Kinect for Xbox 360, Xbox 360 video games, and Xbox 360 accessories; Xbox LIVE; Skype; and Windows Phone. The company markets and distributes its products and services primarily through original equipment manufacturers, distributors, and resellers, as well as through online. Microsoft Corporation was founded in 1975, has 100,000 employees, and is headquartered in Redmond, Washington.

Postscript

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