For a total amount of 5.44 billion euros, the mobile division of Finnish phone maker Nokia will come into Microsoft’s hands.
The total acquisition price of just over 5 billion euros consists largely (3.79 billion euros) of a payment for the phone business. In addition, Microsoft is paying 1.65 billion euros for Nokia’s patents. This does not involve a transfer of patents, but the granting of a ten-year, non-exclusive license to Nokia’s patent portfolio. Of the storied Finnish company, only the network infrastructure, the HERE maps platform, and the R&D department will remain independent.
Microsoft hopes to complete the acquisition officially in the first quarter of 2014. The company still requires approval from Nokia’s shareholders and competition authorities. As recently as last month, industry watchers were speculating about an imminent takeover of BlackBerry by the tech giant.
Ballmer brings potential successor in-house
In an email to employees of Microsoft and Nokia, CEO Steve Ballmer writes that current Nokia CEO Stephen Elop will return to Microsoft and take charge of the hardware division. Two weeks after Ballmer officially announced his departure, rumors are now circulating that Elop will assume the role of Microsoft CEO within a year. Nokia board member Risto Siilasmaa will serve as interim CEO while the company searches for a new chief executive.
Ever since the companies reached an agreement in February 2011 to collaborate closely on the Windows Phone platform, a Microsoft takeover of Nokia had been in the air. At the time, Microsoft already paid billions for exclusive services from its phone partner. This year, a substantial payment was also made from Redmond.
Employees keep their jobs
Until the advent of smartphones, Nokia was the largest player in the telecom market, but it lost significant ground following the introduction of the Apple iPhone and versatile Android phones. With the Lumia series, Nokia hoped to stage a comeback in the high-end market. In addition, Nokia remains an important player in feature phones in emerging markets. As a result of the acquisition, 32,000 Nokia employees will move to Microsoft.
Nokia still had a poor first quarter at the beginning of this year. Despite relatively strong figures for the Lumia portfolio, total net sales fell by 25 percent in Q1 2013. Last year, the company posted a loss of one billion euros.
Windows Phone on Nokia
Since the launch of the first Lumia with Windows Phone 7, Nokia has by far been Microsoft’s most important partner for the mobile operating system. According to the most recent figures, the Finns account for 81 percent of all devices shipped with Windows Phone 7 and 8. Nokia recently criticized Microsoft for not giving the mobile OS sufficient attention.
Corrected to reflect that Microsoft is not buying Nokia’s patents but a license to them. The patent license has a term of ten years and is non-exclusive; Nokia can therefore also sell licenses to its patents to other parties.