Microsoft acquires Nokia’s Devices and Services Business for €5.44 Billion

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Microsoft has announced that it will be buying Nokia’s Devices and Services units.

Microsoft will paying Nokia a total of EUR 5.44 billion (approximately $7.1 billion), EUR 3.79 billion to buy Nokia’s Devices and Services business, and another EUR 1.65 billion to license Nokia’s patents.

From Microsoft’s press release:

Building on the partnership with Nokia announced in February 2011 and the increasing success of Nokia’s Lumia smartphones, Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing. For Nokia, this transaction is expected to be significantly accretive to earnings, strengthen its financial position, and provide a solid basis for future investment in its continuing businesses.

“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services,” said Steve Ballmer, Microsoft chief executive officer. “In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution.” 

Nokia and Microsoft had announced a strategic partnership back in February 2011, where Nokia decided to ditch its ageing Symbian platform, and instead adopt Windows Phone. This seems to be the next phase of Microsoft’s strategy to tightly integrate its software with hardware, a strategy that has been extremely successful for Apple, and recently adopted by Google with the acquisition of Motorola.

Some of the other relevent details from today’s announcement:

  • Approximately 32,000 Nokia employees are expected to be transferred to Microsoft, including 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide.
  • Microsoft is acquiring Nokia’s Lumia (smartphones) and Asha (feature phones) brands. It is also licensing the Nokia brand so that it can be used with current Nokia mobile phones until December 31, 2015.
  • Microsoft will also be licensing Nokia’s HERE platform for four years, and pay Nokia separately for it.
  • Nokia will be retaining its patent portfolio, but will be granting Microsoft a 10-year license agreement to its agreement. Microsoft will in turn grant Nokia its patents used in its HERE maps services.
  • After the transaction Nokia will focus in three businesses: NSN, its networks infrastructure and services business, HERE, its mapping and location services, and Advanced Technologies, its technology development and licensing business.
  • Stephen Elop, Nokia’s CEO and other executives such as Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber will be leaving Nokia to join Microsoft. Elop will be stepping aside as the CEO to become Vice President of Devices & Services division at Microsoft.

Ever since Microsoft and Nokia announced their partnership in 2011, many have been hoping that Nokia will ditch Microsoft and join the Android bandwagon. Unfortunately that dream has been squashed with today’s announcement. Microsoft seems to have secured the future for Windows Phone at least for the foreseeable future.

It will be interesting to see how Microsoft will compete with iOS and Android with this acquisition. Should Apple and Google be worried? Not really, Microsoft still has a lot of work to do to bring Windows Phone on par with Android and iOS, but let’s not forget Microsoft is making a long term bet, so only time will tell.

What do you think? Let us know your views in the comments section below.