Nokia Corporation (NOK) is set to close the deal with Microsoft Corp. (MSFT) after receiving clearance from the European Commission (EU). The transaction is expected to be completed by end of the first quarter of 2014 as was scheduled.
A few days back, got the nod from both the US Department of Justice (DOJ) and Federal Trade Commission (FTC). Earlier, the company had secured shareholders’ approval.
Last Sep, Microsoft decided to acquire Nokia’s handset business for $7.2 billion (5.44 billion euros). The strategic decision is expected to benefit both the tech giants and form a formidable force in the smartphone business.
According to research firm IDC, Nokia does not feature among the top five smartphone sellers in the third quarter of 2013 while Microsoft’s Windows operating system holds the third place with a mere 3.6% market share. Both Google Inc.’s (GOOG) Android and Apple Inc.’s (AAPL) iOS operating platform dominate with 81% and 12.1% market share, respectively. Likewise, Samsung and Apple lead the smartphone sales in the same quarter with 31.4% and 13.1% market share, respectively.
Earlier, Nokia lacked a user-friendly operating system which massively deteriorated its handset sales. In order to counter the competition from rivals like Samsung and Apple, it collaborated with Microsoft to offer user-friendly Lumia smartphones powered with the Windows operating platform, thereby sidelining its own Symbian operating system.
Such strategic partnerships have aided Nokia in improving the smartphone sales. In the recently concluded third-quarter 2013, the company sold 8.8 million Lumia smartphones, up 40% from the prior-year quarter.
Hence, we believe that Nokia will benefit from the recent merger. However, it is yet to be seen how Microsoft deals with its Windows mobile platform as it also supplies to other third-party equipment manufacturers like Samsung and HTC.
Nokia currently carries a Zacks Rank #3 (Hold).
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