Saturday 24 March 2018

Weary Nokia shareholders approve sale of phone business to Microsoft

Nokia's Lumia range takes on Apple's iPhone and Android
Nokia's Lumia range takes on Apple's iPhone and Android

NOKIA shareholders approved the €5.4 billion sale of the company's mobile phone business to Microsoft.

Investors holding more than 99pc of Nokia voting rights supported the deal, according to a final tally at today’s shareholders meeting in Helsinki. The sale is expected to close in the first quarter of next year after regulatory clearances.

Nokia had in September agreed to sell its devices and services business and license its patents to Microsoft after failing to recover from a late start in smartphones.

"I think it's a fair price if you think about the situation right now," said Matti Pirkola, a 58-year-old shareholder as he arrived for the meeting in Helsinki's Ice Hall arena.

Pirkola had been a Nokia shareholder since the early 1980s, when he worked for the company for a few years. "I think Nokia could have chosen another option a few years ago, but now there are no other alternatives," he said.

The sale is set to boost Nokia's net cash position to nearly €8bn from around €2bn in the third quarter - a windfall likely to help it regain investment-grade status from credit rating agencies and allow it to return cash to shareholders.

Nokia earlier this year suspended its annual dividend for the first time in its 148-year recorded history in an attempt to preserve cash.

Billionaire and activist investor Daniel Loeb said in October he had taken a position in Nokia and expected a "meaningful portion of the excess" cash from the Microsoft deal to be returned to investors.

Without the loss-making handset business, the remaining company will derive more than 90pc of its sales from telecom equipment unit Nokia Services and Networks. It will also include a navigation software unit and a trove of patents.

Since the Microsoft deal was announced, Nokia shares have doubled, closing at €5.82 today. They had slumped spectacularly from a 2000 peak of €65 and last year fell as low as €1.33 on worries the mobile phone business would burn through cash before it could catch up with rivals such as Samsung and Apple.

While the shareholder vote showed most believed the Microsoft deal to be the best option, many of the 5,300 attendees at today’s meeting vented their frustration at Nokia's management.

The sale of the mobile phones business, Finland's biggest brand and at one point worth 4pc of national GDP, came as a shock to many Finns. The company's success helped to transform Finland from a backwater economy under the shadow of the Soviet Union into a high-tech powerhouse.

"Nokia has been one of the cornerstones for Finnish society. We are losing part of that," said Sirkka-Liisa Vikman, who said it was her first and likely last attendance at a Nokia shareholders' meeting.

Risto Siilasmaa, the Nokia board chairman who is acting as interim CEO, asked shareholders to look to the future, saying the deal marked a transition for Nokia which has reinvented itself numerous times, starting out as a paper mill and making everything from rubber boots to television sets over the years.

"Nokia has faced major changes on several occasions in its nearly 150 years' history and overcome them," Siilasmaa said.

Nokia phones will become part of Microsoft's efforts to expand in consumer devices, although some analysts say it will have a tough time catching leaders Apple and Samsung.

Many shareholders have also been critical of former CEO Stephen Elop's strategy, particularly his 2011 decision to adopt Microsoft's Windows Phone software over Nokia's own Symbian or Google's Android.

In deciding to drop Symbian, Elop had told employees in an email that Nokia needed to jump from a "burning platform". But some critics said Elop was reckless in betting on the untested Windows Phone system and should have opted for Android, or at least phased out Symbian more gradually.

As Symbian sales collapsed and Nokia faced competition from Asian rivals at the lower end of the market, the company's share of the global handset market fell to around 14pc in the third quarter from a peak of 40pc in 2007.

Elop stood down when he announced the deal with Microsoft, his former employer. He is due to return to the Redmond, Washington company when the deal closes, and sources say he is on a shortlist to replace CEO Steve Ballmer.

Some Finnish tabloids have called Elop a "Trojan horse," criticising his €18.8m leaving payment.

Olavi Savola, a 74-year-old shareholder who had owned Nokia shares for around 15 years, said he was voting in favour of the deal but was still critical of Elop. "When the Canadian came, I knew it that he would take it along with him," he said.

Some shareholders were sympathetic to Elop, saying there were few good options by the time he was hired in late 2010. And many say Nokia, once undisputed leader in the global handset industry, grew complacent and failed to realise the market's transformation following Apple's launch of the iPhone.

"I know there are other opinions in Finland, but I think he did a good job," said shareholder Pirkola.


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