(Add deal detail, CEO, share, analyst)
Continue Reading Below
Microsoft has agreed to install Opera Software's Internet browser on low and mid-market mobile phones it inherited from Nokia, potentially putting Opera Mini on another 100 million phones year.
The deal comes after Microsoft completed its $7.5 billion takeover of Nokia's handset business in April and announced it would cut 18,000 jobs as part of its efforts to halve the size of the Nokia phone business.
"This is a great agreement for us, and something we have been dreaming of for 10 years and now it's finally happening," Opera Chief Executive Lars Boilesen said.
Opera shares surged after the deal was announced on Thursday and at 1410 GMT they were trading up 10 percent, giving the firm a market capitalisation of $1.8 billion.
Opera, which also generates revenues from digital advertising platforms, said the deal would be profitable from day one. It declined to estimate the expected volume, but a source close to the agreement said Opera Mini could now be installed on an additional 100 million handsets a year.
Continue Reading Below
Opera also raised its full-year guidance, predicting earnings before interest, taxes, depreciation and amortization would be $117 million to $124 million, up from previous guidance of $110-120 million, while revenues would come in at $480-500 million versus a previous forecast of $435-460 million.
Norway's Opera said Microsoft would automatically put the Opera Mini browser, known for its ability to compress content and save on data charges, on its feature phones -- mobile phones with more limited capacity than so-called smartphones.
Opera said Microsoft was essentially outsourcing web browser development for all phones that do not use its Windows operating system. Opera Mini will also be pushed out to existing phones to encourage uses to upgrade from the Xpress browser.
"The deal involves feature phones and the Asha product line, which is good, but there is a potential kicker here if they manage to convert existing users, like they say they will," Christer Roth an analyst at DNB Markets said.
"If they succeed then it would give them a solid user base growth, which they indirectly can monetize," Roth said. "The most lucrative part would be if they managed to take over the browser part of all windows phones."
The Opera Mini browser is installed on 250 million phones, primarily in emerging markets. It can compress data by as much as 90 percent, saving operators bandwidth and is compatible with nearly all Internet-capable devices.
Rich Bernardo, head of legacy business, phones, at Microsoft said the deal would allow the company to provide continuity of service as it moves from the Xpress browser to Opera Mini.
"All new phones will be delivered with Opera as their default browser from now on," Boilesen said. "The only thing we are not doing so far is delivering browsers to their Windows Smartphone platform."
"I'm confident that if this deal becomes a success we will deliver browsers to their Windows phones as well," he said.
In the second quarter, Opera's adjusted EBITDA rose 24 percent to $27 million, beating forecasts for $24.7 million. (Writing by Terje Solsvik and Balazs Koranyi; editing by David Clarke)