Nokia seals Microsoft deal amid new CEO speculation

Microsoft: Cloud focus is positive
Microsoft: Cloud focus is positive

Nokia completed the sale of its devices unit to Microsoft on Friday, but at a slightly higher price than expected, amid speculation over its next CEO.

The Finnish telecoms company said the transaction price for the acquisition of its Devices and Services business by Microsoft was 5.44 billion euros ($7.5 billion), up from the 5.4 billion euros its originally announced.

The deal closes another chapter in the long-running story for Nokia as it begins to focus on its network infrastructure business and technology after ditching its unprofitable handset business.

Ville Mannikko | Bloomberg | Getty Images

Nokia's manufacturing plants in Chennai, India, and Masan, Korea, will also not be transferred as part of the deal. The mobile company has been having difficulties in Asia, particularly in India where the factory is subject to an asset freeze as part of a tax dispute with the government. Nokia said the factory will remain under its control and it would produce hardware for Microsoft.

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The Korean plant, which employs around 200 people, will be closed.

CEO speculation

Meanwhile media reports suggested Nokia will name Rajeev Suri as its new boss next week.

Finnish newspaper Helsingin Sanomat, citing unnamed sources, said the move would be announced on Tuesday along with first quarter earnings.

A Nokia spokesperson declined to comment on reports of the new CEO when contacted by CNBC.

Rajeev Suri
Henrik Kettunen | Bloomberg | Getty Images

Suri is currently CEO of the Nokia Solutions and Networks (NSN) arm of the organization which focuses on developing telecoms equipment. Analysts said his appointment as CEO would be a natural move as Nokia begins to focus on its network infrastructure business.

"He has been one of the top candidates all the way along," Sami Sarkamies, senior analyst at Nordea Markets, told CNBC in a phone interview.

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"He is a great person for the job because he is responsible for the largest unit within Nokia. If you look at his tenure as CEO of NSN, we have seen great progress in the profitability of NSN and much has happened since the company initiated the initial restructuring program in late 2011."

The NSN unit accounts for nearly half of Nokia's total revenue and will be the biggest arm within the company when the Devices and Services business is sold to Microsoft.

In 2011, NSN undertook an aggressive restructuring drive that saw around 17,000 jobs axed in an attempt to make the unit more profitable. Suri was the CEO of this business at the time and is largely credited with the success of the turnaround. In 2013, NSN posted operating profits of 1.1 billion euros, up 39 percent from the year before.

Nokia's CEO role has been vacant since former boss Stephen Elop stepped down from his post after the Microsoft deal was announced in September. Elop previously worked for Microsoft and is set to return to his former employer, taking the helm at the devices and services division.

Can Microsoft accelerate Windows phones growth?
Can Microsoft accelerate Windows phones growth?

Despite the credentials of Suri, Sarkamies said he would have to juggle the demands of all of Nokia's businesses carefully.

"He may not necessarily be an ideal candidate because as a shareholder, you could be worried about how he will use his time. Will there be a danger of the ball being dropped on NSN if the CEO is going to spend more time on other businesses within the company?," Sarkamies said.

'Nimbler' Nokia

After shedding its handset service, Nokia will be left with its main NSN arm, as well as an Advanced Technologies unit, responsible for creating new infrastructure products and licensing them under patents, and the HERE mapping and location business.

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Advanced Technologies made operating profits of 329 million euros in 2013, while HERE bought in 48 million euros, relatively small compared with NSN.

The new Nokia is more "nimble", according to Daniel Gleeson, mobile analyst at IHS, who said Nokia would expand its smaller units, creating new technologies under patents and selling the licenses.

"The part of Nokia that will try to be more nimble is its Advanced Technologies Unit," Gleeson told CNBC in a TV interview.

"At the moment that unit is mainly going to be based around licensing its existing patents. But I'd say you're going to see a lot of research into some new technologies, and hopefully even some new products will come out of Nokia in two or three years' time from that unit."