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Is Nokia getting sold too cheap to MS? Investors raise fingers over many aspects of the deal & pose tough questions.

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In last few days we have been contacted by many Nokia investors who found many aspects of the deal bit fishy. They have a few really genuine looking concerns, one of them is certainly the deal amount paid by Microsoft for full “Devices and Services” division. Compared to some recent deals it is really too cheap.

A regular writer at “Seeking Alpha” and Nokia investor “Abu Hussain” has tipped us with his article in which he has raised many tough questions over the deal and many aspects which really need some explannation.

Just read Abu’s analysis about some recent deals and you will really be compelled to ponder  how the Nokia BOD agreed to sell the Nokia D&S divison so cheap?

Regarding Valuation

  1. Why was Motorola worth more than Nokia? (Motorola was sold for $12.5 billion representing a 60% premium on share price. Nokia’s Devices & Services division was sold for $7.2 billion.)

  2. Why was Skype worth more than Nokia to Microsoft? (Skype was bought for $8.5 billion)

  3. Please tell us why Xiaomi is worth more than twice as much as Nokia’s Devices & Services Division? (Xiaomi, a tier-three Chinese manufacturer is valued at $10 billion by its latest venture capital equity boost).

  4. On what grounds would a phone range growing at 27%+ per quarter be sold for less than Xiaomi?

  5. Why did the board not create an open auction in the manner of BlackBerry? Why were negotiations so secretive? How does this maximise shareholder value?

There are many unanswered questions which raise doubt about this deal and the role of Elop the TH (Trojan Horse).

Regarding Negotiations

  1. What guarantee is there that HERE will remain a key component of the WP platform? Microsoft has stated it will only license the platform, but not given any guarantees as to minimum royalty rates.

  2. Nokia has a strong brand name with the “Nokia Lumia” range. Why has the “Nokia” name not been licensed to Microsoft? This would have generated extra revenue for shareholders, especially as Nokia is contractually forbidden from building phones until the end of 2015.

  3. Were any of Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen and Chris Weber involved in the negotiations with Microsoft? Why does this not present a conflict of interest? This is especially pertinent as they will all be joining Microsoft.

  4. Do you think Stephen Elop, former Nokia CEO will be content to be only an Executive Vice President? Is this only being done to keep Elop out of the limelight to ensure the deal is approved?

  5. It is strongly rumored Stephen Elop is likely to become next Microsoft CEO. Does this not present a conflict of interest?

  6. If shareholders have the right to vote on this deal – why was no guidance given that a key asset of Nokia was up for sale?

There are many more similar questions in Abu’s original article. So, click here.

In the meantime, if you want to challenge price of this deal, you can sign in to the below petition sent to us by “Shyam Kumar”.


http://www.change.org/en-GB/petitions/nokia-board-of-directors-questions-the-nokia-board-of-directors-need-to-answer-2

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Nayan

Nayan has more than 10 years of experience of covering Technology and innovations. He is a big Nokia fan and Tech disruptions aficionado. He loves to review new cool gadgets and writing about Android, iOS, Gadgets and general Technology stuff. He has been associated with other well-known Tech sites WinCentral and GadgetOx since long.

He currently sports a Lumia 950 XL and Nexus 5X. Other interests include listening to Nu-Metal Hits and Kick-Boxing.
Write to him at Email: [email protected]

http://www.nokiapoweruser.com
  • Aneesh Menon

    I’ll try and answer some of your questions here:
    1.Why was Motorola worth more than Nokia? (Motorola was sold for $12.5 billion representing a 60% premium on share price. Nokia’s Devices & Services division was sold for $7.2 billion.)
    I think its because Google made an outright purchase of Motorola and all its patents. Patents evaluation was the main reason behind the 12 bil tag but more importantly after the deal was made all analysts have mentioned motorola wasn’t worth half as much. Just because google was stupid doesnt mean microsoft has to go down that road.

    2. Why was Skype worth more than Nokia to Microsoft? (Skype was bought for $8.5 billion)
    Skype was and continues to be the most popular VoIP app. It was the best in the business and had the maximum number of users. It justifies the price tag.

    3.Please tell us why Xiaomi is worth more than twice as much as Nokia’s Devices & Services Division?
    Simply because it sells more smartphones than Nokia and we all know that basic feature phones are a dieing breed; there is no point of exceling in that dept anymore. Moreover just because the company feels its worth 10 bil doesnt mean its actually worth 10 bil..

    4.On what grounds would a phone range growing at 27%+ per quarter be sold for less than Xiaomi?
    On the grounds that the 27% growth was on a relatively small number. Anotehr reason is that inspite of 27% growth the division continues to make loss.

    5.Why did the board not create an open auction in the manner of BlackBerry? Why were negotiations so secretive? How does this maximise shareholder value?
    I’m gonna make a guess here and say that had Nokia come out in the open with idea to sell, its phones would have simply stopped selling cause no one would know what would happen to them. Assume Lenovo purchased Nokia (Divices), you think they would continue with windows phone? If they didnt who would be at a loss?

    1. What guarantee is there that HERE will remain a key component of the WP platform? Microsoft has stated it will only license the platform, but not given any guarantees as to minimum royalty rates.
    Mircrosoft already pays Nokia a Bil an year for the here platform!

    2.Nokia has a strong brand name with the “Nokia Lumia” range. Why has the “Nokia” name not been licensed to Microsoft? This would have generated extra revenue for shareholders, especially as Nokia is contractually forbidden from building phones until the end of 2015.
    This has got to be because Microsoft doesnt want to sell phones with Nokia brand! At some point Microsoft would need to use their own brand and no better time than to start it now. The great part about this deal is that post 2015 Nokia can license its brand to unknown OEMs. I’m Microsoft forbid it to by time to establish its own brand! Nokia is a huge hinderence to that and had to be set to pause at the very least.

    I do wish Nokia didnt have to sell but if Nokia wants to continue to stay relevant in its Here and NSN ventures it needs money to invest and this was probably the only way forward.

    • Aneesh Menon

      Don’t get me wrong guys. I’m a big fan of Nokia and gutted that it sold but I dont think there’s anything fishy going on.

      A lot of here hate Elop at the moment but I genuinely feel that moving away from android and into Wp was a good move. Had microsoft done what anyone with a sane mind expected, we should have had an OS that could go toe to toe with android. But the rework on winphone 8 and now the terribly slow updates have hurt Nokia. I refuse to beleive Elop always wanted to sell or decided to sell when he felt he had a shot at being CEO at microsoft. When microsoft refused to update 7.5 to 8, Nokia (under Elop) secured Win 7.8 and plugged so many of its loop holes. He really tried.
      If we assume that Nokia didnt go down the windows road, we would have had android phones but could Nokia really beat samsung on its turf and with 3 years of expertise on android, its marketing budget and integrated pipeline? Nokia would have sold simply to us, its loyal fans but to others it would have been a costlier android phone than necessary. The Lumias are heavier, the flagships dont have SD support and samsung would have still run away with the show and Nokia would have had little to show for.

      Overall the windows deal gave Nokia the chance to lead the windows platform and had microsoft handled its side of the load little better Nokia would have had 10% of smartphone share. Im disappointed at Micrsoft with the slow progress in feature set and updates to OS.

      But if you look at the larger picture, Windows worked out well for Nokia. It gave them a platform to showcase Here maps (its been largely unsuccessful in iOS and will be in android too)and received 1 bil an year for it. Morover now that the risky move didnt pull off, they were able to get a decent bid. I’m sure had they started android today Nokia wouldnt get the 4 bil it did for the division.

      I hope Microsoft takes the ehart and soul of Nokia, its vision, its philosophies and churns out better phones in the future.

    • Kone i

      Another important detail about Microsoft’s purchase of Skype is that it was a all stock transaction, not all cash like Nokia’s purchase. So the financing is completely different and hence Skype could be valued more.

  • Richard

    there will be at least one more earnings report before this will be given the green light by the shareholders and I assume that all involved in the deal know the current sales numbers. Maybe they are lower than what the optimists are expecting and are already factored into the price of this deal.

  • Jeff

    Don’t forget, by 2017 no one will be selling a phone for over $100 USD. Where are the profits then? I do think Nokia should have gotten another 1.2 billion, but there is always the chance a bidding war will start in the next 6 months.

  • Fernando

    Important question if I may, maybe Kamal can find out for us:

    Who keeps the Pureview patents? The whole team moves to Microsoft of course but how about the patents in that technology?
    This breakthrough can long live on in other brands and Nokia make good money with it.

  • Prasenjit Singh Bist

    I will say future devices not smartphones 😉 i was wondering what happens if Nokia buys out Jolla or Vertu and keeps making Noki ORO devices anything is possible… Nokia still has some stake in vertu.

    but dont expect Nokia too invest this money it gets into venturing again…
    MSFT will win it owns the ecosystem so does apple even samsung will die out and chinese no they wont die but the big brands… PC era and now smatphones is gonna decay to oblivion

  • Prasenjit Singh Bist

    agreed Nokia doen’t have the recources to gain market share being a loss leader.
    Nokia ASPs are down and iPhone5C is for real even Samsung projects ASP drop.
    Vietnam market share is due to devices like 520.

    And this is more of a microsoft battle let them fight give us our dues we look for new pastures. Nokia has done it many times.

    Nokia’s Opex and revenue are too much zig zag u know what i meant so Nokia needs to bring opex down in line with revenues which means 32k people live in shadows of fear job looses these guys are huge talent forget everything just think about this 32k employees MSFT is god send angel to them.

    one gentle man wrote here excellent oiled loss making machine excuse me Sir/ madam whoever u are these 32K people are world’s top 1% talent in industry that Apple MSFT SAmsung every one acknowledges the leaders made startegy mistakes dont curse them for that.. and Now Nokia struggles due to OS choices not hardware innovation read Forbes Verge every one says P holds back Nokia HW.

    Lets celebrate Nokia the old we knew and lets hope for the best to come for the new Nokia.

  • Prasenjit Singh Bist

    You know Kamal what .. Nokia is a big brand and ven the haters admit the brand stands for something meanigful and every one used a Nokia phone at some point of time.
    But Nokia’s share holding has been very scary at best most people are there for short term gain right? its Bear side stock.

    Nokia has changed its core business many times let them do that again . Let Microsoft fight its war. As I was jokig some time back and it might be a blessing u know u get 7+ billion u get HERE licensee and u get rid of Stephen Elop. I hav enever liked that guy may be he is good at talking in presentations but u know he is out right dishonest fake a man who just speaks.

    Investors should look at the + point now there are some who are thinking whats the last pice of things that too could be sold and they would like Nokia brand name be sold… Rediculous what greed makes man do.

    I am super excited u know Kamal we will see premium Nokia products not phones for sure ever but premium disruptions very excited…

    And during these times i advise you as a fan of Nokiapoweruser to keep the exitement alive the Nokia heritage alive. It’s talented guys like you who give us a platform to share our opinions and views.

    Thanks for that and why not we start discussing on what the NRC is cookin up there’s huge potential Kamal. Here Auto is just the beginning and i wont be surprise nokia coming out with wearable tech under Morph brand anytime in 2014.

    Nokia brand is what it is today, so what if Lumia becomes Microsoft Lumia.. the people are same the philosophy is same Nokia brand lives on in our hearts and minds and thats great 🙂

    Noki needs this cash badly it can not keep loosing to go bankrupt it would be too scary u can imagine.. it would be really too bad for the brand and its 90K employees.

    Regards,

  • Prasenjit

    >>Moderated<< I have been a huge fan of your blog and I appreciate your feelings brother. But you too are a MBA think in business sense. Motorola came to Google with 100 patents - Not the same with Nokia. XIAOMI valuation- what is that company never heard and i agree with you. The deal negotiations were carried out by BoD and Stephen Elop was a member of Board - Yes he was involved and u have to involve leadersip team and u have to speak to critical employees for their assesment and that is no wrong given Nokia's opex 27% in not meaningful given ASPs are also compromised. and why should Nokia give up its brand.. As Microsoft already owns Lumia and Windows Phone so now its their job to build on that. If you are so emotional about Nokia you will appreciate Nokia retaining the brand name. i could have explained my PoV better but its saturday and not in a mood to type :))

    • Kamal Mishra

      >>>>If you are so emotional about Nokia you will appreciate Nokia retaining the brand name.<<<< I do, but here the question is asked by investors.

    • vods

      really? MS has just cheaply bought a HW division that once ruled over the market, that has an incredible amount of expertise no other handset manufacturer has, or in the shareholders’ term, that makes the whole company a multi-bagger. And that too with 8500 design patents. Just €3.67 billion for all that?? Dude what are you smoking??

      • Shravan

        Once ruled – yes, not anymore, though. blackberry once ruled the Smartphone world too. Look at where it is now.

  • I’ll agree with this all. I hope shareholders do their magic somehow 🙁

  • Fernando

    Sorry to post another comment but Nokia only sold a money losing machine to Microsoft, a terrific oiled money losing machine that has accumulated billions of losses in the last few years, that is what Microsoft bought, just the devices unit.

    Nokia kept the patents unit (an incredible move) and did not give in and gave away HERE maps. Nokia just recovered enough to get rid of Devices to the only possible buyer as nobody else would have wanted it, yes probably someone else as long as Patents and Here were involved in witch case Nokia would be nothing today.
    When you realize and put into numbers the amount of losses Devices has inflicted Nokia is staggering from all perspectives and measures. The only thing that Microsoft purchase tells us is the desperation that Microsoft is in to make it or break it in mobile, just imaging swallowing 32000 employees in money losing proposition, in a nutshell Nokia only sold it’s past glory and future dreams nothing else, not an egg but the empty shell.
    Incredibly Nokia managed to make $5 billion USD out of that money losing machine….

    Nokia now is nimble and light, patent’s full and innovations to come, NSN a leader in their market and a promising HERE future that one day will pay it’s dividends and most importantly swimming in cash and left the door open to one day make phones again with a much needed fresh start, the patents is the most important component and is in Nokia’s hand.

    So who is better now? Nokia or Blackberry or HTC, blackberry in desperate mode to sell the company and HTC selling half the phones a year ago, not to mention the companies that already gave in and don’t make smartphones any longer.

    We all loved to see the fruit of Nokia’s design, expertise and innovation but we were not seeing the profits and this could not keep going forever. Just wait and see how the smartphone market share looks a couple of months after Apple launches the new Iphone in the next few days, Chinese companies get a bigger piece of the pie and Samsung presses on with pricing in the low end feature and smartphone market.

    Glad is over, I have my 808 and 920 to remember the best phone maker in history, will of course buy a 1020 as this was Nokia’s last marvel but one need to reflect on past performance, present and future obstacles to see the benefits of this sale

    Cheers all

    • This happened just when the profits are about to come. The companies always forsee years ahead and then plan the strategies. So certainly after slowly growing up WP by the daily watering with exclusive apps, this is not the right step. Nokia’s devices business is sold just when it was time to ripe the rewards.

      NPU was expecting Nokia to get out of losses and maybe like break even or show some small profit by the end of this year. So future was really really bright.

      Plus the buyout was super silent. At-least the board people should’ve made a conference and answered the questions of media or at-least the investors.

      • Fernando

        There was an audio conference and a video stream of the announcement, questions were taken and answered by the chairman of Nokia and the CFO. There is a transcript on line if you look for it.

        • I know about that and that has already been streamed by me. I certainly wasn’t talking about that. It was more sorta announcement than a questions session.

          I was looking for a broader meet.

      • Shravan

        Buyouts are generally super quiet, unless it’s a takeover bid or something like that. This is how it normally works. Investors have a chance to ask questions now and also reject it, if they wish to.

        NPU (and most shareholders) doesn’t have access to the same information that the Nokia board does. Wall Street apparently approves of the deal because the shares went up. Moody’s also raised Nokia’s bond rating after the purchase.

    • Jeff

      I agree. $5 billion instantly, which would have taken YEARS to make otherwise. MS now has the headache of 32,000 employees. As an investor I am very happy! I also think NSN and the rest of the company will prosper and the stock will keep moving much higher.

    • Alex

      You’re not considering all the know-how (for example in PureView) that Nokia lost with this deal. They didn’t just sell the production facilities, they sold all the people that matter to making the kind of high-quality products the customers have been accustomed to with Nokia. Replacing that wont be easy – nor cheap.

      So it’s not like Nokia can just buy another factory and start producing consumer products under the Nokia brand all over again. They might as well have sold the Nokia brand for an extra few billions. And I’m saying this as a Nokia shareholder who thinks this deal did not present the best value for shareholders of Nokia stock.

      • Kamal Mishra

        Nokia made rubber boots and car tyres, generated electricity, even manufactured TVs and then we all know the history as it changed the history by being the torch-bearer of innovation around phone industry. It may be hard but still not impossible for them..

  • Fernando

    I am a Nokia shareholder and unless it was a guarantee that not just Windows Phone but just Nokia would have had a 10% smartphone market share by 2017 a sale of devices would not make sense.

    All the pumping, excitement and fanatic aside this could not be achieved with Nokia’s resources if ever would be achieved now by Microsoft besides it was bringing the whole company down along with the Lumia and Asha dreams, really down.

    So lets swallow the pride, pick up the pieces and move on all of us, even Nokiapoweruser…

    GL all, last out turn off the lights

    • Kamal Mishra

      In Europe WP already reached close to 10% market share, Vietnam 15%, Mexico 12.5%. One or two quarters more and it could have been really awesome….Don’t get seduced by rosy picture painted by official channels on the deal. Fact remains, Nokia is about to lose its consumer face and that is what everyone loved. With, Nokia brand still remaining available for smartphones, there is still faint hope of a foray in smartphones in near-future and my blood group is B+ read as “Be positive” 🙂

      • Fernando

        Kamal, I been a reader of your site on a daily basis for the past year, hats off to your work and nothing excited me more than read your revelations of what Nokia was working on and achieving but if there was a mistake by Nokia you could say it was going with Windows Phone not the selling of Devices unit to Microsoft, this was a consequence, we will never know the “if” Nokia went Android so is all speculation.

        Nokia keeping the brand makes it clear they want to leave the door open for consumer products, who knows maybe by the implementation of HTML….. lets call it HTML 8 there will be no OS, one can only hope.

        I firmly believe that in order for Windows Phone to keep the pace Microsoft needs the Nokia brand and will try bid for it in the future,…

        • There might be a mistake back then, but maybe Nokia was still able to cope up with the problems and probably produce a profit in the near future.

          Nokia keeping the brand is a completely different thing. This is certainly because Microsoft wasn’t/isn’t ready to pay more. A recent report says that NOKIA (the brand itself) has a value of around $14 billion. So you know how much Microsoft needs to pay to get that Nokia for their smartphones?

          From a business perspective, this is just like adjustments for present rather than a future thinking. Even the whole of R&D team in the devices division will head over to Microsoft. So there’s not even a chance of return of Nokia. By 2016, I predict a better and stable market of ecosystems with most of the 3rd grade manufacturers drying away and stabilizing the market. Those cheapish Chinese manufacturers will surely disappear.

          In those circumstances it will be impossible for Nokia to ever stand again with no expertise or know-how to the smartphone world and surely no more differentiation possible. All of Nokia’s present services from Nokia Music to Nokia Mail are gonna be MS’s. If it ends this time, there’s no chance of comeback ever…

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