UPDATE: Nokia, Mobile Cos to Create Symbian Foundation

Nokia, Tuesday said it will acquire the remaining stake in Symbian it doesn't already own and with a range of partners create the Symbian Foundation, an open source model for the Symbian wireless operating system.

The move comes as demand increases for smartphones and other advanced wireless devices, and as Nokia faces a growing challenge from Apple Inc's (AAPL) iPhone, a competing operating system from Microsoft Corp. (MSFT), Research In Motion's Blackberry devices and Google's plan to create a suite of phones based on its mobile software platform, Android.

"This will drive the development of new and compelling, web-enabled applications," said Nokia Chief Executive Olli-Pekka Kallasvuo in a statement. "The wide support for this initiative, uniting the industry around the Symbian platform, reflects the strong gravitational pull it has for application developers," he said.

"It's a bold, natural move for Symbian," Symbian Chief Executive Nigel Clifford told Dow Jones Newswires. Clifford said the partners in the foundation weren't just targeting the converged market, "but the whole market, driving lower cost and innovation right through the mid-tier."

Already, some 200 million Symbian-based units have been shipped globally.

Nokia said Tuesday it had the agreement of its other partners in Symbian - Ericsson, Siemens and Panasonic - for the acquisition. Samsung Electronics said it it reviewing the offer for its 4.5% stake.

The Symbian Foundation will comprise a 10-person board split evenly between handset makers Nokia, LG Electronics, Sony Ericsson, Motorola and Samsung, and operators and wireless chipmakers AT&T, NTT DoCoMo, Texas Instruments Vodafone Group and STMicroelectronics.

On completion of the deal, Nokia will contribute its S60 user interface to the foundation, together with the UIQ interface developed by Motorola and Sony Ericsson.

Nomura analyst Richard Windsor said the launch of the foundation is likely to create long-term benefits for the members as it will standardize interfaces and create critical mass, while also helping to ward off competition. Windsor said the acquisition is likely to improve Nokia's margins, as the implied lower royalties will more than offset the costs associated with the deal.

To enable the creation of the foundation, Nokia said it has launched an EUR3.647 a share cash offer for the 52% of shares in Symbian Limited which it doesn't already own, equating to a net cash outlay of around EUR264 million.

CCS Insight estimates Nokia paid out more than $250 million in Symbian license fees last year, meaning it makes commercial sense for Nokia to buy out Symbian for the equivalent of around $410 million.

"The most obvious effect is that license fees for Symbian OS and S60 will disappear," said CCS Insight analyst Geoff Blaber. "That will benefit current licensees, make Symbian extremely attractive to new entrants and push it even more rapidly into mid-tier phones."

Nokia expects the transaction to complete during the fourth quarter, subject to regulatory approval, after which all Symbian employees will transfer to Nokia. On a reported basis, Nokia expects the deal to be dilutive in 2009, approximately break even in 2010, and accretive in 2011.

At 1035 GMT, Nokia shares were down 0.3% at EUR15.63, compared with a 0.6% fall in the DJ Stoxx 600 telecommunications index.

-By Gustav Sandstrom, Dow Jones Newswires; +46-8-5451-3099; gustav.sandstrom@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 24th June 2008