And, surprise, Elop returns to Seattle giant where he could be new CEO
Nokia shares rocket 47%
Nokia is to sell its struggling mobile phone business to Microsoft for £4.6 billion ($7.2 billion), in another eventful twist to the industry which will also see the Finnish manufacturer’s CEO rejoin the ranks of his old company. The news, coming just hours after Vodafone shed its 45% stake in Verizon Wireless, will equally have wide ramifications for the industry, given Nokia’s patents and mapping services will also be licensed to the Seattle giant under the deal.
For many, though, Stephen Elop’s decision to sell off Nokia’s mobile business and return to Microsoft, where he is a contender to take over from its outgoing CEO Steve Ballmer, will be considered the last act of a Judas.
Many Nokia insiders already blame him for the company’s demise in which he resolutely ditched the manufacturer’s homespun Symbian OS in favour of the Microsoft Windows Phone platform.
Until the end of 2010, Symbian had been the most popular smartphone OS on a worldwide average, when it was overtaken by Android, and Elop’s decision to axe it was widely criticised by Nokia investors.
Now it has emerged that Elop will return to Microsoft to head up the new phone unit, freshly kitted out with the produce of Nokia.
In a joint news release, the two companies revealed that the deal will be finalised in early 2014, when about 32,000 Nokia employees will transfer to Microsoft, though the transaction remains subject to approval by Nokia shareholders and regulators.
Once a leader in the mobile phone industry, Nokia’s fortunes have steadily waned. Its sales fell by nearly a quarter in the three months to June this year, compared to a year earlier. Only sales of its flagship Lumia phones – running Windows Phone - showed an increase.
*Footnote: In early trading in Helsinki, Nokia’s shares surged 47 per cent higher on news of the Microsoft deal.
Hedge fund managers take a battering
Hedge fund managers who shorted Nokia’s shares in the belief they would continue dropping have had their figures badly burnt, it’s believed.
Today’s meteoric resurrection of the share price, in which it rocketed up by nearly a half on news of Microsoft’s mobile purchase, means that institutions who shorted – borrowing stock from client shareholders in the hope of buying it back cheaper, later – will face huge losses.
According to research firm Markit, Nokia was one of the most heavily shorted stocks in the European market with 11.9 per cent of its shares out on loan last week.