Microsoft acquires Nokia’s Devices & Services Unit for $7.2 billion

By Darshik Jariwala - September, 3rd 2013

In what qualifies as one of the most promising and interesting deals of the year, Microsoft has bought Nokia Devices & Services unit for a hefty $7.2 billion. The deal is expected close in the first quarter of 2014 after being subjected for approval from its shareholders and Regulators.

Here are some of the details regarding the deal of the $7.2 billion;

Microsoft pays $5 billion for Nokia mobile phone division and $2.18 billion to license Nokia’s patents. According to AllThingsD, about 32,000 employees will be transferred from Nokia to Microsoft, one of whom is the present Nokia CEO Stephen Elop. Mr. Elop will step down as the CEO of Nokia and join as the Executive VP of Devices and Services at Microsoft. Out of the 32,000 employees, 18,300 will be directly involved in the manufacturing department. Once the deal closes successfully, about 56,000 employees will remain at Nokia.

It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies – Steve Ballmer

The deal is definitely good news, as everyone knows that both the companies have been practically struggling to gain and maintain the foothold in the mobile phone market. Less than a decade ago, Nokia was at the zenith in the mobile phone business while Microsoft, on the other hand had a stable business too.

It was only in the last 2 years that Nokia started gaining momentum again (We wouldn’t call it a runway success though), after partnering with Microsoft. The result was Lumia devices. The response, however, was not as strong as either of the company expected it to be, which led Nokia to later develop Asha phones, which looked like a cheaper version of Lumia and ran the good old Symbian OS.

Coming back to the deal, with Devices and Services unit sold off, what Nokia still has left is its NSN technology which is its Network Infrastructure, Advanced Technologies which handles Licensing and Development and Nokia’s HERE Maps. Although Microsoft has included the Maps in the acquisition too (Not quite completely), they will be paying Nokia for 4 years for its license.

About the deal, Steve Ballmer says, “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”. While Risto Siilasmaa, Chairman of the Nokia Board of Directors says that, “this is an important moment of reinvention and from a position of financial strength, we can build our next chapter”, which is the need of the moment. He justifies the deal saying, “After a thorough assessment of how to maximize shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders.”

During the next few months, Nokia plans to hold “an Extraordinary General Meeting on November 19, 2013”. They are also holding a press conference today in Dipoli, Espoo. If you wish to watch the live webcast of the press conference, you can visit http://press.nokia.com/

Microsoft is also holding a press conference today for investors, financial analysts and news media.

It remains to be seen how both these companies fare over the next few months. We all know how Motorola has been treated after being acquired by Google. It must seem to Microsoft like they found a solution, but the deal really raises more unanswered questions and doubts than solutions.

If you wish to read Microsoft’s official announcement of this deal, you may read their official blog post here.

Source: Microsoft

Photo Credit – Jonathan Molina/Flickr