Print 41 comment(s) - last by NellyFromMA.. on May 17 at 10:02 AM

  (Source: driftingfocus/flickr)
Company has $22B USD in assets, but is unlikely to be willing/able to sell them for different reasons

Nokia Oyj. (HEX:NOK1V) was once number one in the phone market.  Number one in smartphones sold.  Number one in total phones sold.  But in 2010, the company was faced with a dilemma.  Its smartphone operating system, Symbian, was growing at a steady pace.  But overall, it was being outpaced in growth by Google Inc. (GOOG) Android and Apple, Inc.'s (AAPL) iOS.  Nokia feared that clinging to Symbian could spell a slow death.  So the company's board made a bold gambit and turned to former Microsoft Corp. (MSFT) executive Stephen Elop for a change of pace.

Mr. Elop in January 2011 gave an impassioned speech labeling Symbian as a "burning platform".  Those words proved prophetic, though it’s open to debate whether he created a self-fulfilling prophecy.  Nokia went on to proclaim Microsoft's Windows Phone as the platform of the future, leaving Symbian in an awkward spot.  Whether Symbian's subsequent tumultuous plunge was due to Nokia's abandonment or to customers' turning to better products in the form of Android and iOS is a hotly debated issue.

I. Now, Certainly, the Platform is Burning

But the facts are what they are.  Today Nokia still is one of the top-five smartphone manufacturers, it still has over $22B USD in assets, and it has seen some promise from early Windows Phone efforts.  But at the same time the company is hemorrhaging cash at an alarming pace and has seen smartphone sales plunge amid as the company slowly made its OS transition at a frustratingly lackadaisical pace.

Reuters is reporting that the situation at Nokia is bad enough that Microsoft may be forced to take more drastic action (in addition to current payments) to "bail out" its struggling partner.  Microsoft has made no secret of the fact that it considers the phone market to be a long term money loser for it, but that it's willing to pour billions from its $60B USD horde of cash into this pit.

burning platfrom
Microsoft may be forced to douse partner Nokia's "burning platform" in
a healing stream of cash. [Image Source: Mobus]

The new report quotes a "veteran technology banker" as commenting, "I don't see Microsoft owning Nokia, but it would definitely provide financing to the tune of a couple of billion dollars."

Another banker was cited as stating that Microsoft was unlikely to purchase Nokia, but was likely to either take an equity stake or offer a generous inter-company loan.  A third banker was quoted as stating that other top phonemakers aren't terribly interested in vying with Microsoft for a controlling interest in the Euro giant who recent saw its credit downgraded to junk.  Comments the third source, "I don't see it as a target for private equity either. It is still too expensive and too volatile.  You would have to be prepared to catch a falling knife."

The financial veterans say that Microsoft has strong vested interests in keep Nokia's assets off the auction block.  Not only does the firm provide Microsoft with a key smartphone hardware partner, but its intellectual property could prove a threat to Microsoft if it fell into the right hands.

II. Rich Assets Unlikely to be Sold for Different Reasons

The company's phone patent portfolio, is very strong -- particularly given it is less reliant on the kind "fair, reasonable, and non-discriminatory" (FRAND) patents that pack the portfolios of such phone making giants as Samsung Electronics Comp., Ltd. (KSC:005930) and Motorola Mobility Inc. (MMI).  FRAND patents are a lovely premise -- industry players cooperating for the betterment of customers and science/technology -- but in the harsh realities of today's hyper-litigious legal atmosphere, they're essentially relegated to junk status.  Thus Nokia's strong collection of non-FRAND IP makes it a dangerous player.

Nokia reportedly forced another non-FRAND powerhouse, Apple, into a favorable licensing deal.  And while Apple is oft blamed for starting the global phone "Patent Wars", an allegation supported by its late CEO Steven P. Jobs' virulent anti-Android rhetoric, it was arguably Nokia who started the war, suing Apple in October 2009.

The phonemaker represents a key threat IP-wise to Apple and the Android alliance.  But it could also prove a godsend to Google, if its IP were to be put on the auction block.  That would be a nightmare scenario for Microsoft, who allegedly has a rather weak smartphone portfolio, but which has shaken down a number of top Android device makers in what multiple Android allies claim is a brilliant bluff (Microsoft refuses to reveal what patents it is threatening to sue Android phonemakers over until after they license).

Android statues
Microsoft would likely rather pay Nokia off than allow its patents to be sold to rival Google.
[Image Source: AndroidModo]

Aside from IP Nokia has two major assets it could sell off -- its Navteq map services unit and its stake in the Nokia Siemens Networks (NSN) joint venture it holds with Germany's Siemens AG (ETR:SIE).  The latter is the more likely of the two to be sold, but doubts of the likelihood of a sale burn bright, given the collapse of a previous sale offer from private interests.  As for Navteq, a sale is very unlikely, say experts, given Nokia's resolute stand that it will not sell the unit, which it views as a core pillar of its product differentiation.

III. Did Mr. Elop Start the Fire?

Some investors hint that it was a mistake to bring Mr. Elop and Microsoft into the house.  States John Strand, founder and CEO of Danish consultancy Strand Consult, "Elop was not hired as a boss for a burning platform.  He put the platform on fire."

Perhaps he's right, but the facts are about as ambiguous as possible -- when Mr. Elop took over Symbian was growing in unit sales, but seeing its market share burn away.  Again it's impossible to say whether everything that's happened since -- plunging sales, the sluggish transition, etc. -- is solely Mr. Elop's fault.  

Stephen Elop
Nokia CEO Stephen Elop [Image Source: Mark Vlander/Getty Images]

But it's also hard to completely absolve the tech veteran of some degree of culpability.  His precise measure of guilt in Nokia's mess is a hot topic among analysts, but their analysis should be recognized as nothing more than educated opinion.

Whatever set the fire; it's certain that Nokia has now been badly burned.  And if there's one thing the analysts seem to agree on, it's that a Microsoft intervention may be vital and necessary for Nokia's survival.

Source: Reuters

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RE: Some things never change
By NellyFromMA on 5/7/2012 1:49:22 PM , Rating: 3
Lol... You owe practically the passed 20 years of your lifes experiences in anything tech to MS.

It always amazes me how people want to whine about Microsoft when they absolutely take forgranted the innumerable ways to which that individual actually owes Microsoft a thank you if nothing else for how the quality of their life has improved.

Microsoft has done more good for technology as a whole than ANY other company I can think of.

The only way your life wasn't affected positively by Microsoft directly or indirectly is if you are an absolute hermit and technophobe. Fact.

RE: Some things never change
By Varun on 5/7/2012 1:59:46 PM , Rating: 4
I agree. People think Microsoft is just using some junk patents to protect itself, when in fact it spends more on R&D than any other tech company. It has to protect this IP - it is a huge amount of money spent. I just quickly found a graph here:

RE: Some things never change
By drlumen on 5/7/2012 2:49:45 PM , Rating: 2
So a mismanaged R&D division (that researches nothing in particular to the tune of $9B) automatically yields tech innovations? Yeah, right.

Here is source of the majority of MS innovations and market share.

Others, like the predecessors of MSDOS and DirectX, they just buy outright as they couldn't do it themselves.

RE: Some things never change
By Solandri on 5/7/2012 6:42:33 PM , Rating: 4
I agree. People think Microsoft is just using some junk patents to protect itself, when in fact it spends more on R&D than any other tech company.

That is kinda the point. If they are not junk patents, then Microsoft should have no problem specifying the patents prior to licensing. They could say what the patents were, people in the industry would look at them and say "Wow, that's a really clever/complex idea. Go Microsoft."

But look at the patents listed in the groklaw link Jason gave: background image on a web browser, tabs, selection handles to resize selected area, document annotation, loading status icon. These are stupid patents which arguably never should have been granted because they are so blindingly obvious. It's likewise obvious why they wanted to keep them confidential, out of the public scrutiny.

Microsoft's creme de la creme stupid patent was recently invalidated by the ITC. It involved a way to map long filenames into FAT's 8.3 filename limit. Up to now, everyone selling a modern memory card formatted as FAT32 (FAT with long filenames) had to license that patent.

It was overturned partly on the basis of 20-year old Usenet posts Linus Tordvals and an anonymous Atari hacker made when someone asked how to implement long filenames. The ideas they sketched up off the top of their heads was what FAT32 did. i.e. It was obvious to someone skilled in the field.

It's just too bad that those billions of dollars in royalties can't be refunded with the invalidation, to discourage others from trying to make profits off of stupid patents.

RE: Some things never change
By raddude9 on 5/7/2012 5:19:17 PM , Rating: 2
Microsoft has done more good for technology as a whole than ANY other company I can think of.

Extraordinary claims like that require extraordinarily good evidence. I notice that you didn't give any evidence though, have you got some?

RE: Some things never change
By maugrimtr on 5/8/2012 10:49:15 AM , Rating: 2
To be fair Microsoft is responsible for some innovation. Almost all companies capable of being profitable must have innovated at some point. That said, Microsoft is easily exceeded by the elephant in the room - open source projects, by volume alone, outweigh Microsoft's innovation and influence. Most of the web actually runs on Linux, the vast majority of programming languages are open source and non-OS specific, etc. MS really only has its pillars of Windows and MS Office to innovate with (which they seem to be trying to do properly for once in Mobile - I'll let everyone judge Windows 8 for themselves for desktops). They do innovate but let's not overstate it out of proportion...

RE: Some things never change
By NellyFromMA on 5/17/2012 10:02:53 AM , Rating: 2
Why would I need to cite evidence? The evidence is all around you? Go to any business and see what they are running for clients and servers. Schools. I mean swing a dead cat and it probably hit something or someone who benefitted from MS. It speaks for itself really..

for the passed 20 years, the only two OSes to even SOMEWHAT come close to touching MS in terms of significance were OS X (or iOS as well if you want to count that, which I'm personally not in this convo) and certain Linux distros. Linux has largely been niche in the server realm and certain client deployments whereas OS X has only been a worthy competitor to Windows as best in both client and server realms....

Look for evidence to the contrary. Good luck with that.

RE: Some things never change
By superstition on 5/10/2012 11:08:05 PM , Rating: 2
Not really.

Some of us have been using non-Microsoft software from the beginning. I only use Microsoft stuff for occasional hobbyist nonsense like playing the occasional game.

Besides, monopolies cause artificially inflated pricing and hurt competition -- not exactly things we should feel indebted to the monopolist for. Everyone lost out when Netscape was destroyed. It was the better browser and who knows how much better it would have become if the market segment hadn't been destroyed by monopolist abuses.

"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007

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