Microsoft Buys Nokia Handset Business

I hope everyone had a nice three-day weekend. The day after Labor Day always feels like a giant “reset” on Wall Street. All the major players are back from their summer retreats. This is also a big week for economic news. This morning, the August ISM was 55.7 which is a very good reading. This is the highest ISM in more than two years.

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Thanks to some lessening of the tensions regarding Syria, the stock market is doing well today. The S&P 500 briefly broke 1,650 this morning which is more than 1% higher than Friday’s close.

The big news today is that Microsoft ($MSFT) is buying Nokia’s ($NOK) handset business for $7.2 billion. Many observers think this is the marriage of two companies desperately behind the times. Under Ballmer, Microsoft has wasted billions of dollars on overpriced deals so it’s easy to see this as just one more. Interestingly, the deal also includes NOK’s patents.

Traders are not pleased with the deal. While the rest of the market is rallying, shares of MSFT are currently down more than 4%. Consider that since December 31, 1999, shares of Microsoft are down more than 42% while shares of Nokia are down 91%. The deal is huge for Nokia, but works out to about 86 cents per share for Microsoft. Henry Blodget calls this a smart deal for MSFT but notes that it has a low probability of succeeding.

Posted by on September 3rd, 2013 at 10:14 am


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