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Dow Futures Surge After Microsoft Buys Half of Nokia

By Demitri Kalogeropoulos - Sep 3, 2013 at 9:00AM

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Companies went shopping over the holiday weekend, too.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Labor Day weekend is a popular shopping holiday, and this year businesses splurged as well. Two corporate deals were announced over the weekend totaling more than $137 billion. The deal-making is pushing the Dow Jones Industrial Average (^DJI 0.03%) solidly higher this morning: Stock index futures as of 7:20 a.m. EDT pointed to an 85-point bounce at the opening bell.

Microsoft (MSFT -0.23%) announced today that it is buying its way into the handset market. The company reached an agreement to purchase Nokia's (NOK 0.62%) devices and services business. It plans to scoop up that division, along with licenses to Nokia's patents and mapping services, for about $7.2 billion in cash. Close to 32,000 Nokia employees will transfer to Microsoft, including current leader Stephen Elop, who was previously a Microsoft executive in charge of the business division. Elop's name has been suggested as a potential replacement for CEO Steve Ballmer, and this deal makes that even more likely. Altogether, Microsoft is acquiring businesses that generated 50% of Nokia's sales last year. In premarket trading, Microsoft's stock is down by about 5%, while Nokia's shares have surged about 46%.

Not to be outdone, fellow Dow component Verizon (VZ 0.88%) finalized a deal with Vodafone (VOD 2.75%) that, at $130 billion, is the second-largest purchase ever. Verizon will get full ownership of its wireless business, which logged $76 billion in revenue last year and boasts 100 million customers. But it had to pay up for that prize. Verizon had reportedly wanted to spend closer to $100 billion, but it relented as spiking interest rates threatened to raise borrowing costs too high to finance the deal. For its part, Vodafone plans to distribute much of the windfall to shareholders, rather than its own splashy acquisitions. Verizon and Vodafone are down by 4.5% and 1.5%, respectively, in premarket trading.

Economic data released over the weekend continued to point to a steady global recovery, as economies in Europe and Asia are showing evidence of stronger growth ahead. The United Kingdom's purchasing manufacturers' index surged to 57.2, the highest level since early 2011, while China's PMI hit a 16-month high.

Closer to home, investors will get a key reading on the U.S economy today. The ISM factory index, due for release at 10 a.m. EDT, is expected to read 54, indicating continued expansion in the manufacturing sector.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,261.90 (0.03%) $8.77
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$252.56 (-0.23%) $0.58
Nokia Corporation Stock Quote
Nokia Corporation
NOK
$4.83 (0.62%) $0.03
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$49.53 (0.88%) $0.43
Vodafone Group Plc Stock Quote
Vodafone Group Plc
VOD
$15.33 (2.75%) $0.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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