Nokia to buy Symbian

HELSINKI (Reuters) - Nokia NOK1V.HE will pay $410 million (209 million pounds) for the remaining shares in UK-based Symbian and make its software royalty-free to boost phone sales and respond to new rivals such as Google GOOG.O.

A model displays a Nokia E66 mobile phone for photographers at a launch event in Singapore June 16, 2008. REUTERS/Vivek Prakash

Symbian's software is used in two-thirds of smartphones -- handsets with computer-like capabilities -- and 6 percent of all cellphones, but new platforms such as Google's Android and Apple's AAPL.O iPhone could challenge its dominance.

“The move’s a shrewd response to growing threats from other providers of mobile phone software,” said Geoff Blaber of UK-based research firm CCS Insight, citing the open-source LiMo Foundation as well as Google and Apple.

Currently, Symbian's closest rival is Microsoft's MSFT.O Windows Mobile operating system, which has just 13 percent of the market despite the U.S. software maker's efforts to gain market share.

Microsoft charges $8 to $15 per phone, according to research firm Strategy Analytics, while Symbian charges on average $4.10.

“This puts a lot of pressure on Microsoft right at a time when they are trying to really push into the consumer space,” said Gartner analyst Carolina Milanesi.

“Lower price points are what operators and the market need to push smartphone adoption and dropping royalty is going to help that. For operators this offers a good alternative to Android,” she said.

Nokia, which makes 40 percent of all phones sold globally, will pay 264 million euros ($410 million) for the 52 percent of British-based Symbian it does not already own, it said.

As Nokia’s market share is much larger than 48 percent among all Symbian phones sold, it has been paying more to its partners in Symbian in royalties on the phones it makes than it has been getting from the firm.

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The Finnish company also said it and other top cellphone makers along with operators AT&T T.N, NTT DoCoMo 9437.T, Vodafone VOD.L and chip makers Texas Instruments TXN.N and STMicroelectronics STM.PA had formed the Symbian Foundation to develop the software further.

“The creation of a unified operating system and a unified user-interface via the Symbian Foundation is classic Nokia. Its desire to develop global, standardised platforms is at the core of all its business operations,” said Neil Mawston from Strategy Analytics.

Nokia will contribute Symbian and its S60 software assets to the foundation, while other members will put in their UIQ and MOAP software to create a new joint Symbian platform in 2009.

“It offers us an opportunity to innovate faster on a bigger, united, more widely accepted platform,” Kai Oistamo, head of Nokia’s devices business, told Reuters. “It also enables us to deliver new products, we believe, faster to the market.”

“I’m convinced we will sell more products,” he told news conference.

Nokia said Sony Ericsson 6758.T, Ericsson ERICb.ST, Panasonic 6752.T and Siemens SIEGn.DE had accepted the offer for their Symbian stakes, and it also expected Samsung Electronics 005930.KS to accept.

“The biggest surprise is that Nokia gets full ownership all at once, and at a good price,” said Karri Rinta, analyst at Handelsbanken.

“This was a logical move. There was pressure for Nokia to increase its holding, especially since there were owners such as Panasonic and Siemens who were there for historic reasons.”

Nokia said it expects the deal to be completed by the end of this year, and to weigh on earnings in 2009.

On reported basis, Nokia expects the acquisition to reach break even in 2010, and boost earnings in 2011. On a cash basis, it expects the earnings boost from 2010.

Shares in Nokia were up 0.1 percent at 15.70 euros at 0848 GMT, broadly in line with the DJ Stoxx European technology shares index .SX8P.

Additional reporting by Sakari Suoninen and Rauli Laitinen in Helsinki, and Georgina Prodhan in Frankfurt; Editing by Quentin Bryar, Paul Bolding