Betting On Boom Times in Mobile

Two corporate buyouts have two separate companies betting that boom times are just around the corner in mobile communications. Microsoft is buying Nokia’s smart-phone division, a $7 billion deal that provides a platform for its next generation of phone software experiments. Separately, Verizon is buying out Verizon Wireless. That wouldn’t be a big deal except for the $61 billion in debt Verizon is taking on to finance the deal. If mobile communications turns out to be a passing fad, unlikely but certainly possible, that is a financial arrangement that could cause hurt all around. Microsoft’s bet is not as large, but it is a high-risk bet from a company that in more than a decade has never put together a winning streak in its phone business. Both buyouts could pay off if there is a sudden surge of interest in mobile phones, and Verizon and Microsoft aren’t the kind of businesses to take billion-dollar gambles lightly. They must have some reason to believe that boom times are coming soon.