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A former leader in the mobile phone sector, Finland’s Nokia encountered problems after the 2007 launch of smartphones, particularly Apple’s iPhone, as well as devices running on Google's Android operating system. In February 2011, Nokia formed a strategic partnership with Microsoft, with Nokia smartphones replacing Nokia’s traditional Symbian operating system with a mobile system from Microsoft. Microsoft bought Nokia's handset business for 5.44 billion euros in September 2013.



Nokia chairman defends Lumia sale

Risto Siilasmaa puts on brave face amid heavy criticisms from shareholders of his predecessor

PUBLISHED : Monday, 25 November, 2013, 3:52am
UPDATED : Monday, 25 November, 2013, 3:52am

Nokia shareholders have approved the sale of its mobile-phone division to Microsoft after about 5,000 people braved icy rain in Helsinki to cast their vote and pay their last respects to a business that once dominated European phone manufacturing.

In the capital's Ice Hall, usually home to the national ice hockey team, crowds witnessed a landmark moment in Finnish history. By a 99 per cent majority, the emergency general meeting ratified the €5.44 billion (HK$57.2 billion) sale of Nokia's handset division. Nokia's chairman Risto Siilasmaa said he was aware the sale "would raise deep feelings" among Finns.

"On the board of directors, we understood that, as the decision-makers, we would also be heavily criticised. However, we are convinced that continuing with the old strategy would have most likely led to great difficulties for Nokia, its shareholders and employees," Siilasmaa said.

When the sale concludes early next year, Nokia would be left with a telecommunications network equipment business, its online mapping division and a trove of valuable patents, only 10 per cent of which had been licensed, executives said. The company will continue to employ 6,000 people in Finland.

In a 41/2-hour meeting, much of the backlash from small shareholders was reserved for Stephen Elop, the chief executive hired from Microsoft who guided Nokia's sale to the software giant before stepping down in September with an €18.8 million severance package.

Shareholder Hannu Virtanen said Nokia's board had acted naively and Elop had been a "triple-A flop" who "drove the company to ruin".

Finns have watched in despair as the 150-year-old company closed factories, cut tens of thousands of jobs and cancelled its dividend.

Elop, who reportedly attended the meeting but did not speak, will transfer with the phone business back to Microsoft and is among those tipped to succeed Steve Ballmer as chief executive of the United States software group.

The alliance Elop founded with Microsoft while at Nokia has begun to bear fruit, with the Lumia handsets that run Windows software helping to push Microsoft's market share up to 10 per cent in Europe, where Apple and Android still dominate.

Siilasmaa, who has stepped in as interim chief executive, defended his predecessor, saying: "I have never met anyone who had done as much work as Stephen has done."

He revealed that other companies had expressed an interest in buying Nokia at the time of Microsoft's approach, but the board considered the US group's offer to be the best option for shareholders.

Speaking from the public gallery, Marko Mannfors argued Nokia was being sold at a discount and a more appropriate purchase price would have been €15 billion.

Microsoft had been forced to act because of the money it was losing in supporting Lumia marketing efforts, Siilasmaa said. For every handset sold, Nokia paid Microsoft a US$10 licence fee to use its software, but Microsoft paid Nokia US$20 to support its marketing efforts.

"From Microsoft's point of view, the equation does not work," he said.

Nokia's handset arm lost €86 million in the most recent quarter. Although that is an improvement from a €672 million loss a year earlier, the company is a long way from recovering the market share taken by Apple's iPhone and Samsung Electronics' Android handsets.

The remaining network business now faces a battle with activist shareholders led by Daniel Loeb's Third Point, which believes the company will have €8 billion in cash once the sale completes and expects a "meaningful portion" to be handed to shareholders as dividends.


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