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Nokia Grabs Symbian, Will Make OS Royalty-Free

HELSINKI -- Nokia will pay $410 million to buy out UK-based mobile phone OS maker Symbian and plans to make its software available, royalty-free, to boost phone sales and respond to new rivals such as Google.

Symbian's software is used in two-thirds of smartphones -- handsets with computer-like capabilities -- and 6 percent of all mobile phones, but new platforms such as Google's Android and Apple's recently updated 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 (NASDAQ: GOOG) and Apple (NASDAQ: AAPL).

Currently, Symbian's closest rival is Microsoft's 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 (NASDAQ: MSFT) charges $8 to $15 per phone, according to research firm Strategy Analytics, while Symbian, which is 48 percent owned by Nokia (NYSE: NOK), 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. In addition to Nokia, device makers Sony Ericsson, Ericsson, Panasonic, Siemens and Samsung Electronics own stakes in Symbian.

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

The Finnish company also said it and other top mobile phone makers, along with operators AT&T, NTT DoCoMo, Vodafone and chipmakers Texas Instruments and STMicroelectronics, 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," said Neil Mawston from Strategy Analytics. "Its desire to develop global, standardized platforms is at the core of all its business operations."

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 a news conference.

Nokia said Sony Ericsson, Ericsson, Panasonic and Siemens had accepted the offer for their Symbian stakes, and it also expected Samsung Electronics to accept.

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

"This was a logical move," Rinta said. "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.