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A couple of weeks ago I wrote one of my typically brilliant stories, only to see that my colleague, Tom Frew, wrote about the same story the very next day. I cautioned him that his “oversight” might be returned in kind someday. I mean, you never know about these things. Today, I return from a lengthy one-week sabbatical, ready to write a bold expose on the latest cellular revolution that is sweeping the headlines, only to find the Tom Terrific had beaten me to the punch with his brief articles, “Microsoft and Nokia Log on for New Deal” and “Vodafone Confirms* Verizon ‘Discussions.” Well, Mr. Frew, the time has come. Someone in the group has got to update these stories and keep them timely.
I almost titled this article as the Cellular Evolution, but I don’t believe in that theory of evolution and what has happened in the last 48 hours is far too dramatic to be called anything other than a revolution. In fact, the sale of Nokia’s (NYSE:NOK) cellular business to Microsoft (NASDAQ:MSFT) at virtually the same time that Verizon Communications has agreed to buy out Vodafone’s (LSE:VOD) stake in Verizon Wireless (NYSE:VAZ) may be the biggest news since Alexander Graham Bell made the first telephone call from London to Paris (Ontario, that is). The combined deals total $137.2 billion, with $130 billion alone (in cash and stocks) being transferred from Verizon Communications to Vodafone alone. The VAZ-VOD deal is the world’s largest corporate transaction of its kind in more than ten years.
Verizon will purchase Vodfone’s stake with a combination of $59 billion in cash. (Pause.) Let me say that again. That is staggering. $59 billion in cash. The balance is comprised of $60 billion in Verizon shares, $7.5 billion in financial instruments, and the return of Verizon’s $3.5 billion stake in Vodafone’s Italian operations.
You might expect Vodafone investors to be wildly receptive of the news, but not so much. The VOD share price has dropped 3.89% so far today, falling 8.3 pence to 204.90. Being the LSE’s fifth-largest listed company by market cap at £99,274.89 million, that has, as Reuters was quick to point out, put a significant drag on the FTSE today. Likewise, Verizon’s share price has fallen by more than 4% this morning and is currently fluctuating heavily.
On the other hand, Nokia share price is up 42.04% on the Finnish Exchange at €4.2100, contributing to a 4.7% increase on the NASDAQ OMX Helsinki 25 Index. It’s shares on the Stockholm exchange are up similarly by 39.21% to 36.01, and 38.77% to 5.41 on the NYSE. Microsoft shares declined 4.9% in pre-trading, but was showing a small gain after the opening bell.
Microsoft will acquire “substantially all” of the Nokia business in a deal that also includes the acquisition of Nokia patents. While this may not be a relationship made in Heaven, the hope is that the synergies will pull Nokia out of the doldrums and that it will stimulate Microsoft’s venture into the cellular market place with its Windows Phone. Opinions are widely varied on the potential success of Microsoft’s move, but that’s really nothing new, is it? Microsoft may be the Johnny-come-lately to the mobile phone market, but it’s not exactly like the company is a technology novice.
Things could become very interesting very soon.
*Tom Frew wrote “confirm” instead of “confirms.” No problem. I’m here to help him.
