Let the money exchange flow both ways. That’s what is starting to transpire in the Nokia/Microsoft deal and there are a lot of zeros involved in the transactions.
Microsoft is set to pay Nokia Oyj over $1 billion for the development and promotion of Windows-based phones. In exchange, Nokia pays Microsoft for each copy of Windows used in its phones. Stocks have fallen over 25% since the announcement of the agreement between the two companies less than a month ago.
According to Colin Gillis, analyst at BHC Partners, “This gives Microsoft scale and allows Nokia to rip out costs. Microsoft is getting the platform boost that comes from acquiring a Nokia for about a billion dollars.”
Despite the drop based upon uncertainty, Gillis believes that now is the time to buy Microsoft shares. Current shareholders are not as impressed.
Microsoft CEO Steve Ballmer is under the gun to improve sales of mobile software with shares falling by 7.8% in the first quarter of this year so far.
CFO Peter Klein is more optimistic about the large investment.
“In success, it is a very mutually beneficial deal economically for both companies,” Klein said.