Nokia sells messaging unit to Synchronica

The struggling phone maker is shedding assets as consumers skip its current products

Nokia is selling its operator-branded messaging business to Synchronica, a British developer of mobile messaging software, the companies said Thursday. The business unit provides email and instant messaging services to the likes of AT&T and Verizon.

Synchronica is paying $25 million in cash for the assets, all but $4 million of it deferred, and will also issue Nokia warrants for 18.3 million common shares in Synchronica.

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As part of the deal, Synchronica will take over contracts serving 10 mobile operators in North America, and obtain source code for Nokia's client and server software, as well as some patents and patent applications.

For Synchronica, the deal means it will get a foothold in the important U.S. market. So far, the company has seen the popularity of its existing products grow in developing countries, according to CEO Carsten Brinkschulte. For users of the operator services based on Nokia's platform it should be business as usual, since Synchronica will continue to offer full support.

Synchronica and Nokia will also enter into a long-term relationship in which Synchronica provides the messaging software which Nokia will continue to pre-load on Series 40 phones.

Nokia's operator-branded messaging business was the result of its acquisition of Canadian company OZ Communications in September 2008, and allows operators to offer their own e-mail and instant messaging services that integrate Internet-based services from Google, AOL and Microsoft.

But as Nokia rebuilds itself to focus on Microsoft's Windows Phone platform it is no longer a core business, the company said in a statement. Approximately 250 Nokia employees will also transfer Synchronica.

Last week, Nokia finalized the agreement to outsource Symbian software development and support activities to Accenture, and in the process shed 2,800 employees. Earlier this year the company also sold its Qt commercial licensing and services business to Finnish company Digia. Qt is a cross-platform application and user interface framework.

At the end of May, Nokia was forced to lower financial expectations for the current quarter, as it sold fewer phones at lower prices ahead of its switch from Symbian to Windows Phone.

The change in fortunes underlines the severity of Nokia's current situation, and emphasizes the need for the company to swiftly deliver Windows Phone devices and phones with dual SIM cards, a feature that is important in developing countries, market research company CCS Insight said at the time.

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