Now That Microsoft Has a Handset Business, What Does It Do With It?

Now that Nokia Corp. (NYSE: NOK) has unloaded its unprofitable mobile handset business on Microsoft Corp. (NASDAQ: MSFT), the question is how does Microsoft make it profitable? Microsoft declined to say in its guidance for next quarter what the impact of the Nokia purchase would be. Why? Because it doesn’t know yet.

Nokia reported an operating loss of $273.7 million for its Devices and Services division for the fourth quarter, and it will post its first-quarter results next week.

Microsoft reportedly shelled out $7.52 billion, more than the original estimate around $7.2 billion. And what does it get? The Finnish company’s mobile and smart phone business, as well as licensing — not ownership — of Nokia patents. Microsoft also does not get some mobile phone manufacturing facilities in India and South Korea that it had wanted.

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However, Microsoft is in the hardware business now. The question is, what expertise does Microsoft have in global supply chain management, mobile phone manufacturing, smartphone design and engineering and the like that Nokia did not have? Nokia couldn’t make this business work.

It is said that Bill Gates and other board members opposed this deal when then-CEO Steve Ballmer first proposed it. Even current CEO Satya Nadella is said to have opposed the deal at one time. Until some specific plans for the new Microsoft Mobile Oy are announced, investors will have to wait — and speculate — to see what Microsoft intends with its new toy.

Meanwhile, the new Nokia will go on as a networking company with a research and intellectual property unit, among other things pushing its Here mapping system.

Microsoft shares were up fractionally in late morning trading Friday to $40.06, in a 52-week range of $30.84 to $41.66.

Nokia shares were down fractionally to $7.24. The stock has traded in a range of $3.25 to $8.20 in the past year.

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