Nokia’s woes might call for Microsoft aid

Wednesday, 9 May 2012 00:01 - - {{hitsCtrl.values.hits}}

Reuters: Addressing Nokia Oyj employees in January 2011, Chief Executive Stephen Elop – at that point only four months into the job – dramatised the company’s predicament by comparing it to standing on a burning platform.

Nearly a year and a half on, and with Nokia’s Lumia mobile phone range failing so far to revive sales, its position still looks frail. Its shares have lost 90 per cent in five years and its debt is rated junk by two of the three major ratings agencies.

Might Microsoft Corp, Elop’s former employer and whose software Lumia is based on, have to step in to help Nokia out, seeing the Finnish company as a valuable point of entry into the cell phone market?

Analysts have attributed Nokia’s decline in large part to its late response to Apple Inc, whose iPhone redefined the smartphone market in 2007, and some see a marriage with Microsoft as possibly a last chance to turn the group around.

For Microsoft the relationship is important, because Nokia was its first major break into the smartphone market after a decade of heavy investment.

During that period other cell phone makers either chose to use their own software – as did Apple – or favoured Google Inc’s Android.

“If Nokia ends up in financial difficulties I believe the helping hand would be there,” said Sami Sarkamies, an analyst at Nordea.

Nokia and Microsoft declined to comment.

Microsoft is already paying Nokia $1 billion a year to use its software on Lumia smartphones. And investment bankers familiar with the technology sector said the support could extend well beyond that amount, if Nokia’s problems intensify.