Pre-Market Primer: Microsoft to Buy Nokia Handset Business; European Outlook Improves

By Vincent Trivett  SEP 03, 2013 8:36 AM

US ISM manufacturing and construction spending data are still to come.

 


Stock futures are higher today as the focus shifts from Syria to Microsoft's (NASDAQ:MSFT) purchase of Nokia's (NYSE:NOK) device business.

It was announced today that Microsoft will buy Nokia's mobile handset business as well as licenses to its patents and mapping service.    

The $7.2 billion acquisition is definitely a very telling episode for Microsoft's future. Purchasing the Finnish company means that Microsoft is most likely not turning back on Steve Ballmer's vision of making Microsoft into a "hardware and services" company. Stephen Elop, a former Microsoft executive, will return to his old company. In 2010, Elop took control of Nokia and steered it toward the Windows Phone platform from its already obsolete Symbian. Windows Phone hasn't done much to give Nokia a bigger bite of the smartphone business, however. With Ballmer retiring within a year, Elop may be a contender to take the helm at Microsoft.

Microsoft will pay 0.35 times the annual revenue of Nokia's handset business. A similar transaction where a software company acquired its way to a more significant hardware business occurred when Google (NASDAQ:GOOG) bought Motorola Mobility for 0.77 times its annual revenue.

Microsoft's acquisition of Nokia might also unsettle its hardware partners such as Samsung (OTCMKTS:SSNLF), which build Windows Phone devices and Windows PCs.

The markets clearly see this as a win for Nokia. After the news, Nokia shares are up 46.5%. Microsoft is down 4.6%.

Also in corporate news, Time Warner Cable (NYSE:TWC) resumed broadcasting CBS (NYSE:CBS) programs after a month-long blackout for millions of customers.

Stock futures in the US are trading higher today. Dow (INDEXDJX:.DJI) futures were up 0.59% to 14,882 while futures contracts on the S&P 500 (INDEXSP:.INX) rose 0.83% to 1,644.80. Nasdaq (INDEXNASDAQ:.IXIC) futures gained 0.63% to 3,092.75.

Commodities trading also fell this morning as fears of an imminent war in Syria faded. Gold is down just slightly, and West Texas Intermediate oil fell 0.5% to $107.11 per barrel.

Later this morning, we will get the Institute for Supply Management's August survey results. The manufacturing index is expected to fall 1.6 points to 53.8. Readings over 50 indicate that the sector expanded last month. Economists expect the Markit manufacturing PMI, on the other hand, show a slightly faster rate of expansion last month, rising 0.2 points to 53.9. Also on the economic calendar is construction spending, which is likely to have risen 0.3% in July after falling 0.6% in June.

European shares mostly fell today, despite a report that European manufacturing PMI rose to a 26-month high of 51.4 in August. France was the only country where manufacturing didn't improve, though some simply contracted more slowly.

Asian indices are mostly higher as China's official services PMI fell to 53.9 from 54.1 in August. Yesterday, HSBC announced its August flash estimate for manufacturing PMI to be 50.1, up from 47.7 in July. Japan's Nikkei (INDEXNIKKEI:NI225) rose 2.99%, thanks to the weaker yen.

The Organisation for Economic Co-operation and Development (OECD) hiked its 2013 GDP estimates for several European countries, saying that emerging markets are being outpaced by mature ones. Britain was revised up to 1.5% growth this year from 0.8% while France's estimate was raised to 0.3% growth from 0.3% contraction. Germany was revised up to 0.7% from 0.4%.

Twitter: @vincent_trivett
No positions in stocks mentioned.

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