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December 18, 2013 01:41 am GMT
Microsoft’s purchase of Nokia’s hardware business appears set to sail through, having passed shareholder and regulator approval. The 5.44 billion euro deal will see “substantially all of Nokia’s Devices & Services business” become part of Microsoft,according to the companies. The deal will allow Microsoft to wrest control of its smartphone platform from a third-party that had increasing hegemony over its end-user experience. Nokia has become the de facto Windows Phone manufacturer, as its rising unit volume met slackening competition due to flagging OEM interest. What will the financial impacts of the Nokia deal be for Microsoft? Two questions need to be answered: Compared to Microsoft’s revenue, how large is the Nokia purchase in terms of relative top line? Also, what impact can we expect Nokia’s hardware business to have on Microsoft’s earnings per share? To explore these issues we will source data from both companies, their joint statement, and industry forecasts. We’ll first examine Nokia’s net sales compared to Microsoft revenue, and then weigh their net incomes to determine an expected percentage and dollar decline in Microsoft’s earnings per share using historical data. Revenue Microsoft says it will purchase “substantially all of Nokia’s Devices and Services business,” a statement that is far too generic to use. Happily, it supplied another figure that is quite useful: In 2012, the portion of Nokia that it will purchase generated 14.9 billion euro in net sales. According to Nokia, the larger Devices and Services group had net sales of 15.686 billion euro in 2012. So, Microsoft is buying assets that drive around 95% of Devices and Services’ net sales. We can use that figure to estimate calendar 2013 Devices and Services revenue, which we can then compare to Microsoft’s same-period revenue to get a good handle on their relative scale. 2012 data isn’t acceptable, as Nokia has shrunk in the interim while Microsoft has grown, distorting the comparison. Nokia’s calendar 2013 Q1, Q2, and Q3 net sales totaled 17.209 billion euro. In that three-quarter period, 8.51 billion euro came from the Devices and Services division, or 49.5%. This is a good number, as it jibes with Microsoft’s comment that the Devices and Services net sales from 2012 that is attributable to what it is purchasing was “almost 50 percent of Nokia’s net sales for the full year 2012.” The market expects Nokia to report 6 billion euros in net sales in calendar Q4 of
Original Link: http://feedproxy.google.com/~r/Techcrunch/~3/cXvnerjiSuo/
How The Nokia Purchase Will Impact Microsofts Financials
Microsoft’s purchase of Nokia’s hardware business appears set to sail through, having passed shareholder and regulator approval. The 5.44 billion euro deal will see “substantially all of Nokia’s Devices & Services business” become part of Microsoft,according to the companies. The deal will allow Microsoft to wrest control of its smartphone platform from a third-party that had increasing hegemony over its end-user experience. Nokia has become the de facto Windows Phone manufacturer, as its rising unit volume met slackening competition due to flagging OEM interest. What will the financial impacts of the Nokia deal be for Microsoft? Two questions need to be answered: Compared to Microsoft’s revenue, how large is the Nokia purchase in terms of relative top line? Also, what impact can we expect Nokia’s hardware business to have on Microsoft’s earnings per share? To explore these issues we will source data from both companies, their joint statement, and industry forecasts. We’ll first examine Nokia’s net sales compared to Microsoft revenue, and then weigh their net incomes to determine an expected percentage and dollar decline in Microsoft’s earnings per share using historical data. Revenue Microsoft says it will purchase “substantially all of Nokia’s Devices and Services business,” a statement that is far too generic to use. Happily, it supplied another figure that is quite useful: In 2012, the portion of Nokia that it will purchase generated 14.9 billion euro in net sales. According to Nokia, the larger Devices and Services group had net sales of 15.686 billion euro in 2012. So, Microsoft is buying assets that drive around 95% of Devices and Services’ net sales. We can use that figure to estimate calendar 2013 Devices and Services revenue, which we can then compare to Microsoft’s same-period revenue to get a good handle on their relative scale. 2012 data isn’t acceptable, as Nokia has shrunk in the interim while Microsoft has grown, distorting the comparison. Nokia’s calendar 2013 Q1, Q2, and Q3 net sales totaled 17.209 billion euro. In that three-quarter period, 8.51 billion euro came from the Devices and Services division, or 49.5%. This is a good number, as it jibes with Microsoft’s comment that the Devices and Services net sales from 2012 that is attributable to what it is purchasing was “almost 50 percent of Nokia’s net sales for the full year 2012.” The market expects Nokia to report 6 billion euros in net sales in calendar Q4 ofOriginal Link: http://feedproxy.google.com/~r/Techcrunch/~3/cXvnerjiSuo/
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