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Nokia to Sell App Unit Amid Increasing Microsoft Reliance

August 09, 2012

Nokia to Sell App Unit Amid Increasing Microsoft Dependence

The disposal highlights Nokia’s increasing dependence on Microsoft as it tries to stem plunging sales amid competition from Apple Inc.’s iPhone and devices running Google Inc.’s Android software. Photographer: Ashley Pon/Bloomberg

Nokia Oyj (NOK1V), the smartphone maker that started using Microsoft Corp. operating systems to revive its business, agreed to sell its Qt app-tools unit to Digia Oyj (DIG1V) as it abandons home-grown software efforts.

Nokia bought the Qt technology in 2008 to give developers tools to write applications for Symbian and MeeGo devices -- two operating systems it’s since cast aside in favor of Microsoft’s Windows Phone. As many as 125 employees will move to Digia as part of the deal, according to a statement from the Finnish software maker today. No terms were disclosed.

The disposal highlights Nokia’s increasing dependence on Microsoft as it tries to stem plunging sales amid competition from Apple Inc. (AAPL:US)’s iPhone and devices running Google Inc. (GOOG:US)’s Android software. Nokia Chief Executive Officer Stephen Elop, who started betting on Microsoft software last year, has shed units, announced more than 20,000 job cuts and closed plants in a bid to return the company to profit.

“With Nokia smartphones relying on Windows-based applications, which are rapidly increasing in number, Qt no longer has a role to play in Nokia’s smartphone efforts,” said Janardan Menon, an analyst at Liberum Capital Ltd. in London. “Nokia is keen to restructure, to squeeze out margin as well as improve cash where possible.”

Nokia climbed 8.2 percent to 2.32 euros at 3:37 p.m. Helsinki time. Digia added 10 percent to 2.64 euros.

Once Dominant

Qt was part of Nokia’s effort to fend off Apple, which introduced the iPhone in 2007 and used the popularity of apps -- programs such as games written for specific devices -- to gain sales from the then-dominant smartphone maker. Nokia’s market value has plunged about 90 percent since the iPhone’s debut as Apple surpassed it in smartphone sales.

After the iPhone and Android took over the market from Espoo, Finland-based Nokia, Elop adopted Microsoft (MSFT:US)’s operating system to refreshen the company’s lineup and differentiate from the competition. Windows Phone has so far failed to challenge the iPhone and Android, accounting for 3.5 percent of purchases last quarter compared with 85 percent for the two market leaders combined, according to research firm IDC.

Nokia plans to announce its new line of smartphones using the Windows Phone 8 operating system as early as next month and offer them for sale before the year-end holiday shopping season, a person with knowledge of the matter said this month.

“We’ll have to wait until the fourth quarter for evidence of sales of the new Windows Phone 8-based smart phones to see whether the link to Microsoft pays off,” Menon said.

Patent Disposal

Digia, based in Helsinki, already bought parts of the Qt business last year. It said it plans to bring Qt to other operating systems, such as Android, Apple’s iOS and Windows 8.

Nokia acquired Qt with its purchase of Norway’s Trolltech ASA for 844 million kroner ($154 million) in 2008.

Separately, Nokia agreed to sell more than 500 patents to Vringo Inc. for an undisclosed amount of cash and proceeds from revenue generated from the portfolio. The patents cover mobile technologies including data and signal transmission, New York- based Vringo said today in a statement.

To contact the reporter on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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