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Wednesday, June 01, 2011, 11:20 am PT (02:20 pm ET)

Nokia denies $19B Microsoft purchase, but rumored deal viewed as boon for Apple

Nokia reacted quickly on Wednesday to a report claiming its phone business was acquired by Microsoft for $19 billion, calling it "baseless." But one Wall Street analyst had another word to describe a hypothetical deal between the two companies, at least for Apple investors: "heaven."

Speculation of a new deal between Microsoft and Nokia stems from a single Twitter post made by Eldar Murtazin, editor of Mobile-Review.com (via BGR). The post comes after Murtazin had previously reported in May that Microsoft and Nokia were set to enter into negotiations for a potential deal.

"One small software company decided last week that they could spend 19 [billion U.S. dollars] to buy part of a small phone vendor," the vague tweet reads. "That's it."

As the rumor spread, Nokia on Wednesday publicly commented on the issue, and called the claims "100 percent baseless," according to Reuters. The company's stock dropped as much as 10.2 percent on Wednesday as the rumor spread.

Murtazin was one of the first to suggest in late 2010 that Nokia could ditch its Symbian platform and partner with Microsoft to run the Windows Phone mobile operating system. That agreement was eventually announced in February in a deal struck with Nokia's new chief executive, Stephen Elop.

But Murtazin did have one high-profile miss recently, when he said in December that Apple would add a USB port to its second-generation iPad. The iPad 2 went on sale in March, but only features the standard 30-pin dock connector.



As the Microsoft-Nokia rumor gained steam on Wednesday, analyst Brian White was quick to pounce on the news. In a note to investors, he declared that Microsoft buying Nokia's mobile phone division would be "a deal made in heaven for Apple investors."

"(A Microsoft-Nokia deal) should provide Apple investors with even greater confidence that the company can continue to gain market share at the expense of legacy vendors in the mobile phone market," White said. "In our view, Apple investors could not ask for a better deal, and we believe a transaction would only further Apple's market share gains in the coming quarters."

Though Nokia denied the rumored deal with Microsoft on Wednesday, White sees the Finnish handset maker as perhaps the greatest source of market share gains for Apple. Nokia has struggled of late and lost share, but continues to be the worldwide leader in unit market share.

In April, IDC reported that Nokia shipped 108.5 million total mobile phones in the first quarter of 2011. That was good for a market share of 29.2 percent, well ahead of second-place device manufacturer Samsung at 18.8 percent. LG was in third with 6.6 percent, followed by Apple with 5 percent.

If Microsoft were to actually buy Nokia's struggling smartphone business to bolster its Windows Phone platform, White believes it would put Apple in a position to make even greater gains, filling the void left by Nokia.

"Microsoft's myopic approach outside the PC market is likely to provide more of a drag for Nokia mobile phone business and uncertainty for customers, allowing Apple's iPhone to gain even further market share in the coming quarters," he said.

Though the rumors of a Microsoft-Nokia deal were outright denied on Wednesday, the Redmond, Wash., software giant did confirm a different high-profile acquisition earlier this month: an $8.5 billion purchase of Skype. Microsoft plans to use that investment to support services like Xbox and Windows Phone.