Will Nokia Corporation (NOK) Downgrade Entice Microsoft Corporation (MSFT)?

Nokia Corporation (NYSE:NOK), the struggling mobile handset maker, got some more bad news Wednesday when Standard & Poor’s downgraded the company’s bond rating to BB- from BB+ and gave a negative outlook for the company. With that in the face of encouraging reports about Nokia’s all-in banking on the success of Windows Phone 8 when it launches soon, might this be a time that Microsoft Corporation (NASDAQ:MSFT) considers a noteworthy acquisition?

Stephen Elop & Steve Ballmer

Nokia Corporation (NYSE:NOK) has seen its overall smartphone market share take a tumble in the last couple of years, though the company is still producing strong results in emerging markets like South Africa and Indonesia, as we’ve reported before. The company has stated that it is due to release a new line of smartphones that will be designed to meet the needs of the Windows Phone 8 operating system from Microsoft Corporation (NASDAQ:MSFT). Nokia has been phasing out its proprietary Symbian operating system and is planning to be a very loyal partner for Microsoft as it launches its new smartphone OS. With all of the hype surrounding the new OS, and the now-symbiotic relationship between Microsoft Corporation (NASDAQ:MSFT) and Nokia Corporation (NYSE:NOK), there is a lot to lose for Microsoft if Nokia doesn’t succeed, but there is a lot to gain for Nokia if Windows Phone 8 takes off as expected.

With so much at stake for Microsoft Corporation (NASDAQ:MSFT) in this alliance, and with the downgrades and overall negative outlook of Nokia Corporation (NYSE:NOK), a question is being raised – should Microsoft take the next step in developing a proprietary ecosystem (which it’s trying to do with the Surface tablet) and purchase Nokia? Well, the company did pursue this avenue before, but didn’t take the leap at the time because the stock was a bit higher than it is now. But with the stock wallowing at about $2.50 a share, and with the negativity surrounding the company moving forward, it’s possible now that Nokia could be had for a cheaper price than before.

The time could be right for Microsoft Corporation (NASDAQ:MSFT) to move, should it so desire. Nokia Corporation (NYSE:NOK) could be on sale now like never before, or may never be again, especially if the new Windows handsets succeed. The consideration of a Nokia takeover would likely be a boon for hedge funds that hold Nokia positions, like billionaire Jim Simons’ Renaissance Technologies, which took an $18.5 million position in Nokia during the first quarter of 2012 – after not having any stake prior to the new year. Check out the rest of Jim’s portfolio.