What's next for Nokia?
After selling its mobile business to Microsoft, the Finnish company can expect a prosperous future as it pushes into the telecom services business.
By Richard Saintvilus, TheStreet
People are still stunned after Microsoft (MSFT) made it official that it was acquiring Nokia's (NOK) mobile phone business, along with Nokia's strong patent estate. (Microsoft owns MSN Money.) But the deal, I believe, had been in the works for more than two years.
Contrary to what investors wish to believe, there's no question that Nokia, which was in a cost-cutting mode for more than a year, was cleaning up its books in anticipation of this deal. By now, everyone should have had a chance to sort through the details. The only question is what happens next?
First and foremost, we have to agree that Nokia's phone business, which has struggled to compete against Apple (AAPL) and Samsung (SSNLF), has been a disappointment, if not a complete failure. But that is now Microsoft's problem. Even after this deal, which is pending regulatory approval, is completed, Nokia will still have loose ends to tie up.
There's the issue of Nokia getting a new CEO -- the current one, Stephen Elop, will step down as soon as the deal closes. He'll become executive vice president of devices & services at Microsoft. Not surprisingly, rumors are flying that Elop will succeed CEO Steve Ballmer, who recently announced his intention to step down within the next 12 months.
For now, Nokia Chairman Risto Siilasmaa will be the acting chief executive while the company searches for a permanent replacement for Elop.
Won't be kicked around by Apple and Google
So for a company in Nokia's position that has just executed an "about face" in its business model, a lame-duck position in the CEO chair is not the type of overhang on which Wall Street thrives. Not to mention Elop is expected to bring with him four key Nokia executives, which would then leave the management cupboard bare and with little experience.
For Nokia investors, though, there's no question that they were the real winners in this deal -- regardless of who or what is left over to drive the company forward. That the company was able to secure $7.2 billion for a mobile phone business that has failed to muster any type of competitive edge against Apple and Google (GOOG) was an impressive win for shareholders. Also, I believe Nokia escaped with perhaps the best deal it could have gotten.
What's more, the company is no longer strapped for cash and, contrary to what many bears wish to think, with Nokia's handset business now off the books it now has a more attractive business than many on the Street seem willing to accept.
Let's not forget that after spending $2.2 billion to buy the remaining portion of its joint venture with Siemens, (SI), Nokia now owns 100% of a business that has kept it afloat amid the company's struggle in the phone business.
What this means is Nokia will be able to devote more focus on growing a business that was already doing well. Given the company's cash infusion, along with what is still a strong brand around the globe, Nokia's push into the telecom services business should be an easy transition. I don't think Nokia's investors will complain that the company is no longer being pushed around by Apple and Samsung.
There will be those who say Nokia gave up. But it's not the first time this company has transformed itself. Unlike BlackBerry (BBRY), which can't shed the "dead man walking" moniker by hanging up the phone, Nokia now has a prosperous future ahead. At around $4 per share, it wouldn't surprise me if the stock reached $6 in the next 12 months on the basis of stronger profitability in the network business.
More from TheStreet.com
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Start investing in technology companies with help from financial writers and experts who know the industry best. Learn what to look for in a technology company to make the right investment decisions.
Under pressure from anti-violence groups, the social media site said it will remove illegal offers to sell firearms across state lines or without background checks.
VIDEO ON MSN MONEY
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'