Report: Microsoft plan to buy Nokia's phone biz fell apart

Microsoft (NASDAQ:MSFT) and Nokia (NYSE:NOK) held talks as recently as this month on a sale of Nokia's mobile devices business to Microsoft, but the talks broke down and are not likely to be revived, according to a report in the Wall Street Journal.

The report, citing unnamed sources familiar with the matter, said that the companies were recently in advanced discussions and had made "significant progress" toward a sale of the unit. Nokia's devices and services division is the crown jewel of Nokia's business, but has struggled as Nokia has transitioned away from Symbian and embraced Microsoft's Windows Phone platform.

The Journal report said Microsoft walked away in part because of the price and because of Nokia's position in the market. Nokia's overall market share has continued to dwindle as sales of its Lumia-branded phones and its Asha line of touchscreen devices have not made up for falling feature phone sales and dwindling Symbian volumes.

According to research firm Gartner, Nokia's overall global handset market share slipped to 14.8 percent in the first quarter from 19.7 percent in the year-ago period. Nokia sold 5.6 million Lumia phones in the first quarter--a quarterly record--but continued to trail the likes of Samsung Electronics, Apple (NASDAQ:AAPL), LG Electronics, Huawei and ZTE in smartphones. Windows Phone's global market share stood at 2.9 percent in the first quarter, up from 1.9 percent in the year-ago quarter, Gartner said.

"We have a deep partnership with Microsoft and it is not uncommon for Nokia and Microsoft to meet on a regular basis," a Nokia spokeswoman told the Journal. A Microsoft spokeswoman declined to comment, according to the report.

Nokia now has flagship products with three of the four Tier 1 U.S. carriers. Nokia is hoping that sales of its high-end Lumia 925 through T-Mobile US (NYSE:TMUS) and Lumia 928 through Verizon Wireless (NYSE:VZ) will help bolster sales.

Microsoft has no current plans to build its own Windows Phone smartphone and would only do so if partners like Nokia and HTC are not making the most of the platform, Terry Myerson, the corporate vice president of Microsoft's Windows Phone division, said in April. Nokia said in March in a Securities and Exchange Commission filing that if Microsoft builds its own branded Surface smartphone, the move could hurt Nokia's business.

For more:
- see this WSJ article (sub. req.)

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