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Nokia CEO Elop Says Report on Microsoft Deal Is ‘Baseless’

June 1 (Bloomberg) -- Nokia Oyj Chief Executive Stephen Elop said speculation that Microsoft Corp. agreed to buy his company’s mobile-phone unit is “baseless,” denying a post by the BoyGeniusReport website that cited blogger Eldar Murtazin.

Elop has never discussed an acquisition with Microsoft, he said in an interview. “We have a great plan for our future, and we’re focused on executing that plan,” he said. “The rumors are all over the place. There’s no basis for them.”

Nokia shares pared losses following the report and closed down 0.8 percent in Helsinki trading today after earlier declining as much as 10 percent. Two people familiar with Microsoft’s plans, who declined to be named, also said the speculation isn’t true.

The Finnish company yesterday scrapped its full-year sales and margin forecasts for handsets and services and said revenue at the unit would “substantially” fall short of its projected range this quarter. The stock slumped 18 percent to a 13-year low, exceeding the 14 percent slide on Feb. 11, when Nokia announced a deal to adopt Microsoft’s operating system.

Doug Dawson, a spokesman for the Espoo, Finland-based company, said the acquisition report was “completely baseless” in a telephone interview earlier today. Melissa Havel, a spokeswoman for Redmond, Washington-based Microsoft, declined to comment.

‘Out of Range’

Elop, who was hired at Nokia from Microsoft in September, told investors yesterday he has “increased confidence” that Nokia can ship its first phone based on Microsoft’s Windows Phone 7 in the final quarter. Before that happens, the CEO still has to cope with consumers fleeing the company’s Symbian handsets, based on the operating system Nokia decided to abandon after failing to keep up with Apple Inc.’s iPhone and Google Inc.’s Android, the fastest-growing smartphone platform.

Nokia operates in both high-end smartphones and cheap handsets, Elop said. The smartphone business is the focus of Nokia’s relationship with Microsoft, and the low-end phones are “way out of range for Microsoft,” he said today. The partnership the two companies have is “the most effective way for the companies to work together.”

Strategy

Adnaan Ahmad, an analyst at Berenberg Bank in London, said it wouldn’t make sense for Microsoft to buy Nokia’s mobile-phone business.

“M&A was realistic before the Microsoft deal, but that option has more or less gone away,” Ahmad said. “From a Microsoft perspective, they are getting what they would have got from M&A for free.”

Moody’s Investors Service today placed Nokia’s A3 long-term debt ratings under review for a possible downgrade. Nokia’s decision to cut its sales and margin forecast “indicates a faster that anticipated erosion in market share extending from smartphones to Nokia’s core mobile phones range and accelerating price pressures,” Moody’s said.

Second-quarter sales for devices and services will be “substantially” less than a projected range of 6.1 billion euros to 6.6 billion euros, Nokia said yesterday. The unit’s operating margin will fall short of a forecast range of 6 percent to 9 percent and will be about breakeven, the company said.

To contact the reporter on this story: Peter Burrows in San Francisco at pburrows@bloomberg.net; Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.netvroot@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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