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Nokia Drops on Microsoft System Decision: Helsinki Mover

Nokia Oyj (NOK1V), the Finnish smartphone maker using Microsoft Corp. (MSFT)’s operating system, fell to a 16- year low after analysts said sales may be hurt as the U.S. supplier’s new program won’t work on its current phones.

Nokia dropped 11.4 percent to 1.71 euros in Helsinki, the lowest since August 1996. The stock has lost more than half of its value this year.

Microsoft, the largest software maker, said on June 20 that its Windows Phone 8 program will go on sale in the second half and that phones running previous versions can’t be upgraded. The move may make Nokia’s current models less attractive, hurting a company already grappling with mounting losses and highlighting its dependence on Microsoft.

“What happens with Microsoft is crucial for Nokia as it tries to control its cash burn,” said Michiel Plakman, a fund manager at Robeco Group in Rotterdam, who helps manage about 9 billion euros ($11.2 billion) including Microsoft shares. “The problem for Nokia, as it’s been in the last couple years, is that there’s no plan B.”

Plakman said he sold Nokia shares before the company’s agreement with Microsoft last year. Nokia Chief Executive Officer Stephen Elop, a former Microsoft executive, placed Nokia’s bets on Windows Phone while abandoning its in-house Symbian operating system.

‘Legacy Products’

Stuart Jeffrey, a New York-based analyst at Nomura Holdings Inc., lowered his revenue estimate on June 22 for Espoo, Finland-based Nokia, citing the new Microsoft product. The Helsinki stock exchange was closed for a holiday on June 22.

Nokia may sell fewer of its Lumia phones that run Windows Phone in the third quarter than previously estimated because some customers will wait until the Windows Phone 8 release before buying a new device, Jeff Kvaal and Andrew Gardiner, analysts at Barclays Capital, said in a note June 21. Current Lumia devices are “somehow already legacy products,” the analysts said.

People who own a current-generation Lumia will be able to upgrade to Windows Phone 7.8, featuring a new home screen, Doug Dawson, a Nokia spokesman, said on June 22. Clients will also receive updates including functions like streaming of media content, the ability to connect other devices to the Internet through the handsets and new games from Zynga Inc. (ZNGA)

Samsung Electronics Co., which overtook Nokia in the first quarter as the world’s largest handset maker, said today its Galaxy S III will help mobile earnings surpass the first-quarter record after users responded more positively to the latest smartphone model. The Galaxy model line runs on Google Inc. (GOOG)’s Android operating system.

To contact the reporters on this story: Ville Heiskanen in New York at vheiskanen@bloomberg.net; Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

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

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