Microsoft and Nokia held advanced talks about a possible acquisition of the Finnish handset maker's device business, according to a June 19 report in The Wall Street Journal.
The negotiations, which took place as recently as this month in London, fell apart and the chances that Microsoft will make another offer appear slim.
Sources familiar with the matter told the Journal that the talks "aren't likely to be revived." The report indicates that despite making "significant progress in a plan," the companies could not agree on a critical component of any deal: the price.
"Redmond, Wash.-based Microsoft eventually walked away from the deal in part because of the price and Nokia's own strategic predicament—where it ranks as a trailing player to Apple and Samsung," stated the report.
Microsoft was also reportedly exploring the possibility of funding the deal with offshore cash. "The company has about $66 billion of cash held in offshore subsidiaries—a stockpile that would be tough to bring back to the U.S. without incurring a large tax bill," according to the Journal.
When asked about the deal, a Nokia spokeswoman told the news organization, "We have a deep partnership with Microsoft, and it is not uncommon for Nokia and Microsoft to meet on a regular basis."
Nokia is Microsoft's top Windows Phone partner. Beset by the rising popularity of rival smartphone ecosystems from Apple and Google, the technology giants announced on Feb. 11, 2011, the formation of a strategic partnership that would make Windows Phone Nokia's principle mobile operating system. The companies "have the opportunity to disrupt the current trajectory in the battle of ecosystems," Nokia CEO Stephen Elop said at an event announcing the deal.
"We have a formidable plan to ensure our collective leadership in the smartphone market and in the ecosystem that surrounds it," Elop added. "Our long-term strategic alliance will build a global ecosystem that creates opportunities beyond anything that currently exists."
Two years later, Microsoft and Nokia are still struggling to catch up to Apple and device makers that support Google.
Google Android and Apple iOS powered a staggering 92.3 percent of the smartphones shipped during the first quarter of 2013, according to IDC. The remainder, less than 8 percent, was shared among Windows Phone, BlackBerry OS, Linux and a smattering of other mobile operating systems. Nokia phones accounted for 79 percent of all Windows Phone shipments in the first quarter.
While there are some encouraging signs that the Microsoft-Nokia partnership is starting to bear fruit, the companies still face daunting competition.
"Windows Phone claiming the third spot is a first and helps validate the direction taken by Microsoft and key partner Nokia. Given the relatively low volume generated, the Windows Phone camp will need to show further gains to solidify its status as an alternative to Android or iOS," Kevin Restivo, an IDC senior research analyst, said in a statement.