Nokia Oyj (NOK1V) investors cleared the sale of its mobile-phone unit to Microsoft Corp. (MSFT) in a 5.44 billion-euro ($7.4 billion) deal, unshackling the Finnish company from the unprofitable division and letting it focus on networks.

Shareholders meeting in Helsinki yesterday approved the disposal of the business that makes Lumia smartphones and Asha feature phones to the software giant, Nokia officials announced at the event. More than 99 percent voted in favor of the deal.

The sale lets Espoo, Finland-based Nokia concentrate on its network-equipment unit while freeing it from a shrinking business that struggled to gain ground against Apple Inc. (AAPL) and Samsung Electronics Co. The deal is the largest strategic change for Nokia since it stopped making rubber boots and tires and left businesses such as paper more than two decades ago.

“Continuing our existing strategy would have resulted in great difficulties,” Chairman Risto Siilasmaa told investors. “We have no doubt that this is the right decision.”

Nokia agreed to sell the phone division in September, after failing to regain relevance in smartphones following Apple’s iPhone introduction in 2007. Once the world’s largest smartphone maker with a market share topping 50 percent, Nokia now ranks outside the top five with about 3 percent share.

Lumia’s Struggle

Shares of Nokia fell 0.7 percent to 5.78 euros at 10:31 a.m. in Helsinki. They have almost doubled since the deal was announced, bringing its market value to 21.6 billion euros. Microsoft dropped 1.2 percent to $36.74 in New York trading yesterday.

Nokia’s Stephen Elop, who joined as chief executive officer three years ago from Microsoft, scrapped the phonemaker’s own operating system in favor of his former employer’s Windows software. Elop, who now heads the device unit that will go to Microsoft, cut more than 21,000 jobs and shuttered production facilities in an attempt to make Nokia profitable.

Elop will get more than $25 million for completing the divestment and is a contender to be Microsoft’s next CEO. Nokia and Microsoft expect to complete the deal in the first quarter.

While sales of Nokia’s Lumia smartphones have steadily risen, climbing to 8.8 million devices last quarter, the device remains far behind Samsung and Apple, who sold more than 120 million smartphones in the period combined.

National Pride

Nokia introduced its first tablet and two smartphones with six-inch displays last month. The products will help Microsoft expand the Windows device lineup to better challenge Apple and Samsung’s dominance of the tablet and smartphone markets.

Yesterday’s meeting lasted for hours as shareholders voiced concerns over the future of Nokia, whose phones were a source of national pride in Finland and at one point were carried by 90 percent of Finns. After introducing its first handsets three decades ago, Nokia emerged as Finland’s first major global corporation and symbolized the country’s transformation into a technology-driven economy.

Some shareholders criticized Elop’s reward as too large, while others pushed Siilasmaa to explain how Nokia ended up in a position leading to the sale. Many individual shareholders at the event supported the disposal.

“I consider the sale as positive,” Kari Nieminen, 49, a Finnish doctor and a shareholder, said in an interview. “Nokia is able to rid itself of the more unstable business and focus on growing the stable ones.”

Networks Focus

Nokia lost its competitiveness in mobile phones before Elop’s tenure, when the company was characterized by arrogance, Nieminen said. Nokia’s management in recent years made several wrong choices, including not pushing forward with innovations the company made, said Veijo Laine, 66.

“Now I’m finally in the black,” said Laine, who is retired. “The future looks good.”

After the divestment, Nokia will make more than 90 percent of its sales from the networks business it fully took over from Siemens AG in August. Revenue at the unit, Nokia Solutions and Networks, fell 26 percent to 2.59 billion euros last quarter. The unit’s operating profit, excluding some items, was 218 million euros.

“Nokia can now focus on its remaining business,” said Hannu Rauhala, an analyst at Pohjola Bank in Helsinki. “Margins for the handset business will in the long term fall as they did in the laptop industry.”

NSN chief Rajeev Suri has cut more than 20,000 jobs at the network unit to bring it back to profit. Nokia last month predicted improving profitability for NSN this quarter, helped by the job cuts and focus on more lucrative contracts.

Cash Proceeds

Nokia is looking for a new CEO and is working on a new strategy for a life after mobile phones. Besides networks, the company is keeping its mapping and location services business, called Here, and its technology development and licensing unit.

Among the options Nokia is considering is a tie-up with Alcatel-Lucent’s wireless-equipment unit, a person familiar with the plan said in September. The deal would boost NSN’s market share especially in the U.S., allowing it to better challenge larger Ericsson AB. Alcatel-Lucent shares have tripled this year and were unchanged at 2.90 euros in Paris yesterday.

Nokia’s gross cash is set to expand to more than 14 billion euros, the highest on record, after it gets the proceeds from the sale to Microsoft. Either a special dividend or stock buyback is possible, activist investor Daniel Loeb’s Third Point LLC said last month as it disclosed a stake in the company.

(Source: Bloomberg)