Nokia Acquisition News Causes Shares Drop for Microsoft
Nokia Acquisition News Causes Shares Drop for Microsoft by UCStrategies Staff
Following news of the Nokia acquisition by Microsoft recently, the latter’s shares took a significant hit. The company had proposed a $7.1 billion acquisition for Nokia’s mobile business, and industry analysts and investors have expressed worry over Microsoft’s ability to mark itself out as a mobile market leader.
Initially, investors were not on board with the planned big-bucks purchase, and shares at Microsoft dropped more than $2 (more than 6 percent), and soon after continued to fall on Sept 3, the morning after the deal was announced. Nokia’s shares, on the other hand, shot up over 40 percent after the news came.
Analysts have voiced their concern over what the acquisition might mean for investors as Microsoft works to gain share in the mobile marketplace.
A technology analyst from J. Gold Associates, Jack Gold, said: “From an investor perspective, I'm not convinced that this is going to give Microsoft the kick they need in mobile.”
An analyst with William Blair & Co., Anil Doradla, noted that technology and industry uncertainties over the deal meant that there was a lot of doubt over the software company’s plans to change to hardware.
Doradla said: “There's going to be more bears than bulls on this acquisition for sure.”
A senior research analyst with Lake Street Capital Markets, Eric Martinuzzi, stated that the deal was reminiscent of the $1.2 billion acquisition of Palm by Hewlett-Packard in 2010, which was declared largely to be a disaster. Martinuzzi stated that the drop in shares highlighted investor concern about Microsoft’s buyout of a platform which may soon be seen to be out-of-date.
Gold said that the Nokia acquisition was another move which emulated Apple and Google’s steps, and this cannot be filled as Nokia only has around 3 percent of the mobile device market.
Gold said: “They're not getting ahead; they're following. Think of why [Microsoft is] doing this -- it's not because they're so far ahead of things. Show me how this will ultimately make [Microsoft] the leader in mobility, given that Nokia has 3 percent of the market.”
This is not what all analysts have said – some state that Microsoft has been making small cultural steps in the correct direction, initially with the announcement about Steve Ballmer’s upcoming retirement, and now with the Nokia deal.
An independent industry analyst, Jeff Kagan, said: “This kind of deal would not make sense yesterday. Going forward, tomorrow this might make sense. To see this kind of change is good. It's what Microsoft needs to shake itself up and come out of its cocoon. ... The question is: When are they going to catch on? ... Will it be this year? Next year? ... We don't know. But at least they're kicking and screaming in the right direction.”
Kagan added: “The question is will this merger, this buyout, accelerate growth? I can't answer that.” (CY) Link