Microsoft to acquire Nokia’s Devices and Services business for $7.2 Billion

September 3, 2013

    Nokia-Elop-Ballmer-005

    Microsoft is all set to acquire Nokia’s Devices and Services division for $7.2 billion. Under the terms of the agreement, Microsoft will pay close to $5 billion for “substantially all” of Nokia’s Devices and Services business, including the Lumia brand, with another $2.2 billion to license Nokia’s patents, bringing it to $7.2 billion in cash. Nokia, in turn, will grant Microsoft a 10-year non-exclusive licence to its patents, and Microsoft will grant Nokia reciprocal rights to use to its location-based patents. The software giant will draw upon its overseas cash resources to fund the transaction, which is expected to close in the first quarter of 2014, pending approval by Nokia’s shareholders, regulatory approvals, and other closing conditions.

    As a part of the agreement, Nokia CEO Stephen Elop will be leaving his current position to become Executive VP of the Microsoft Devices and Services division. His return to Microsoft also gets him on the shortlist as a potential candidate to take over from Stephen Ballmer, who has already announced his plans to resign.  Nokia Chairman Risto Siilasmaa will become Nokia’s interim CEO while the company searches for a permanent replacement. Along with Elop, approximately 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide.

    Nokia will host a press conference today, September 3, at 11 AM, EEST in Dipoli, Espoo. Only media representatives who show valid press credentials will be given access, but, the press conference will also be streamed live at http://press.nokia.com.

    Takeover and acquisition rumors are a part and parcel of the tech world, and ever since Nokia bet the house on Windows Phone, many analysts have been saying that such an acquisition was inevitable. Someone got it right, considering the fact that for most of us, this announcement came out of nowhere.

    Check out the press release below for complete details on the acquisition.

    Show Press Release

    Microsoft to acquire Nokia’s devices & services business, license Nokia’s patents and mapping services
    Sept. 03, 2013
    REDMOND, Washington and ESPOO, Finland – Sept. 3, 2013 – Microsoft Corporation and Nokia Corporation today announced that the Boards of Directors for both companies have decided to enter into a transaction whereby Microsoft will purchase substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services.

    Under the terms of the agreement, Microsoft will pay EUR 3.79 billion to purchase substantially all of Nokia’s Devices & Services business, and EUR 1.65 billion to license Nokia’s patents, for a total transaction price of EUR 5.44 billion in cash. Microsoft will draw upon its overseas cash resources to fund the transaction. The transaction is expected to close in the first quarter of 2014, subject to approval by Nokia’s shareholders, regulatory approvals and other closing conditions.

    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.”

    “We are excited and honored to be bringing Nokia’s incredible people, technologies and assets into our Microsoft family. Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we anticipate a smooth transition and great execution,” Ballmer said. “With ongoing share growth and the synergies across marketing, branding and advertising, we expect this acquisition to be accretive to our adjusted earnings per share starting in FY15, and we see significant long-term revenue and profit opportunities for our shareholders.”

    “For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter,” said Risto Siilasmaa, Chairman of the Nokia Board of Directors and, following today’s announcement, Nokia Interim CEO. “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. Additionally, the deal offers future opportunities for many Nokia employees as part of a company with the strategy, financial resources and determination to succeed in the mobile space.”

    “Building on our successful partnership, we can now bring together the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing and manufacturing,” said Stephen Elop, who following today’s announcement is stepping aside as Nokia President and CEO to become Nokia Executive Vice President of Devices & Services. “With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.”

    Nokia has outlined its expected focus upon the closing of the transaction in a separate press release published today.

    TERMS OF THE AGREEMENT

    Under the terms of the agreement, Microsoft will acquire substantially all of Nokia’s Devices and Services business, including the Mobile Phones and Smart Devices business units as well as an industry-leading design team, operations including all Nokia Devices & Services-related production facilities, Devices & Services-related sales and marketing activities, and related support functions. At closing, approximately 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide. The operations that are planned to be transferred to Microsoft generated an estimated EUR 14.9 billion, or almost 50 percent of Nokia’s net sales for the full year 2012.

    Microsoft is acquiring Nokia’s Smart Devices business unit, including the Lumia brand and products. Lumia handsets have won numerous awards and have grown in sales in each of the last three quarters, with sales reaching 7.4 million units in the second quarter of 2013.

    As part of the transaction, Nokia is assigning to Microsoft its long-term patent licensing agreement with Qualcomm, as well as other licensing agreements.

    Microsoft is also acquiring Nokia’s Mobile Phones business unit, which serves hundreds of millions of customers worldwide, and had sales of 53.7 million units in the second quarter of 2013. Microsoft will acquire the Asha brand and will license the Nokia brand for use with current Nokia mobile phone products. Nokia will continue to own and manage the Nokia brand. This element provides Microsoft with the opportunity to extend its service offerings to a far wider group around the world while allowing Nokia’s mobile phones to serve as an on-ramp to Windows Phone.

    Nokia will retain its patent portfolio and will grant Microsoft a 10-year license to its patents at the time of the closing. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services. In addition, Nokia will grant Microsoft an option to extend this mutual patent agreement in perpetuity.

    In addition, Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four-year license.

    Microsoft will also immediately make available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible notes that Microsoft would fund from overseas resources. If Nokia decides to draw down on this financing option, Nokia would pay back these notes to Microsoft from the proceeds of the deal upon closing. The financing is not conditional on the transaction closing.

    Microsoft also announced that it has selected Finland as the home for a new data center that will serve Microsoft consumers in Europe. The company said it would invest more than a quarter-billion dollars in capital and operation of the new data center over the next few years, with the potential for further expansion over time.

    NOKIA LEADERSHIP CHANGES

    Nokia expects that Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber would transfer to Microsoft at the anticipated closing of the transaction. Nokia has outlined these changes in more detail in a separate release issued today.

    EXTRAORDINARY SHAREHOLDERS MEETING

    Nokia plans to hold an Extraordinary General Meeting on November 19, 2013. The notice of the meeting and more information on the transaction and its background are planned to be published later this month.

    PRESS CONFERENCE

    Nokia will host a press conference today, Tuesday, Sept. 3, at 11 a.m. EEST in Dipoli, Espoo (Otakaari 24). Registration will start at 10 a.m., and the doors will open at 10.40 a.m. Due to space constraints, only media who show valid press credentials at the registration will be admitted. Media are encouraged to watch a live webcast of the press conference at:http://press.nokia.com/

    INVESTOR CALLS

    Microsoft will hold a conference call for investors, financial analysts and news media Tuesday, Sept. 3, at 3:45 p.m. EEST/8:45 a.m. EDT. Interested parties should call toll-free at (888) 459-9165, or for international calls dial +1-773-799-3324. You may also access the call online athttp://www.microsoft.com/investor.

    Nokia executives will hold an investor call at 3 p.m. EEST today, Tuesday, Sept. 3. A webcast of the conference call will be available at http://investors.nokia.com. Media representatives can view the webcast or listen in at +1 706 634 5012, conference ID 45390451.

    MEDIA ENQUIRIES

    Nokia
    Communications
    Tel. +358 7180 34900
    Email: press.services@nokia.com
    www.nokia.com

    Microsoft
    Rapid Response Team, Waggener Edstrom Worldwide, +1 (503) 443-7070,rrt@waggeneredstrom.com

    Via

    Source

    Comments

    • MasterMuffin

      this thing is all over the news in Finland! No Nokia Android phone anymore :(

      • APai

        are you from finland ? and if yes, don’t you guys feel shafted ? All of this was predicted while elop arrived there.

        basically, elop is the ultimate trojan the world has EVER known. he killed symbian and all open source projects inside nokia. kept only microsoft yes men in Nokia. sold anything of no value for MICROSOFT, and brought nokia down on its knees. made it super cheap to buy and went for the kill.

        • Zv3r

          Yes, ultra cheap. lol

        • MasterMuffin

          Yes, I’m from Finland. And you got that absolutely right, Elop was the ultimate trojan, but he did good too. WP is still better than Symbian, his only big failure was that he said that they’re killing symbian though they were still selling symbian devices and no WP was coming for 6 months or more (Nokia’s share dropped like 50%, that killed Nokia (which may have been his plan though)). Other smaller failures are that he didn’t even try Android and killed MeeGo

          • APai

            even if symbian was destined to doom, it was really elop who consigned it to flames in one go. his burning platform memo gutted nokia sales faster than any company/ product ever in the history!! sales slow down in most cases , but not in a crash, like in the case of symbian. besides, symbian is closer to android in structure -so users would have preferred to go the android route – as it is very evident with sales now. Nokia would have done great if they had a sane board opting for android instead of an OS pretty much 90% do not want. Nokia’s sales are much to do with users preferring a nokia device rather than the other way around. if the other way was true, then we’d have seen roaring sales of windows phone at lg/ sony/ samsung/ htc – clearly that did NOT happen!

            So I blame elop/ microsoft/ plus elop’s stooge yesmen nokia board for the entire collapse.

            • MasterMuffin

              We can never know what would have happened if they had gone the Android route. Probably better things, but you can never know

            • APai

              given that htc/ sony/ lg have done better with android – all of these phones makers did twice as much in sales as Nokia is doing now a good 2 years after the mobile boom. given Nokia’s strength in developing markets – I’m willing to wager, they could easily have done thrice as much sales as they are doing now. at least. however, it can always be said as a big if, since its never been done.

              India was a Nokia stronghold. now, the number 2 company is micromax in smartphone sales. they are exclusively android. so doesnt it say a thing or two about android popularity ? Nokia was stupid in hiring elop, next it was wrong in not hedging their bets on a multi-OS strategy.

            • MasterMuffin

              but still you can’t know for sure :P

          • Luka Mlinar

            Kind of looks like he softened Nokia down for Microsoft to take over. Wonder how much MS would pay before all this sh..

        • NeedName

          I was saying this day one he was appointed CEO. . . especially after looking who had been put on the Nokia board the previous 3 years to his arrival.

          Just sickening to see such a great company taken over in such an underhanded way!

          • christine liu

            You should think of it as partnership since the way the phone shape is designed it fits more window and how the program fits with the phone design kind of only match windows and Nokia isn’t just phones

      • maduranGa KarunanayakE

        anymore ?? we never had a chance to even see one,

        • MasterMuffin

          what I ment was that no chance for that happening anymore

          • maduranGa KarunanayakE

            i had the same dream of having a android powered Nokia……

            • APai

              and now I want to see windows phone go down, because of what microsoft did to nokia

            • MasterMuffin

              I want it to succeed so that iOs will die >:)

            • APai

              haha, that’s a real challenge ms vs apple :)

            • MasterMuffin

              Ms has more money, Apple has more swag

            • APai
            • MasterMuffin

              Yup and rest of that is history, N9 came and they said it was an experiment and they wouldn’t make any more MeeGo phones (that killed N9 and Jolla was born), but the design stayed for was it Lumia 800 or 900 that got it first. It was a great phone, but lacked stuff and WP7 wasn’t just good. WP8 came and now WP is an okay phone os and new Lumias have great hardware (though lack on CPU power and WP8 doesn’t yet support full hd screen). I hope WP9 brings something great and gives support for Full HD screens and better CPU

            • Chibuzor Ifediorah

              No, no a challenge, a trashing, ms can not march apple head on, not in 5years time at their current rate

    • End in sight

      This is so sad. Tragic.

      I really hoped that we would see a Nokia phone running Android. It was the only hope for Nokia.

      RIP Nokia.

    • Rushan

      And Microsoft will aquire Dell as well soon

    • maduranGa KarunanayakE

      oh god why

    • Nutgobbler

      Omg that’s the kiss of death to any possible android Nokia device in the future, such a shame but not unexpected as both companies are control freaks so they are probably well suited for each other, I certainly will never buy a Nokia phone device in the future which I had hoped to providing they used android

    • Luka Mlinar

      Ill just say this: If i had any shares of Nokia, this would be the time to sell them.

    • OMGgary

      NO!!!!
      This is terrible. I loved Nokia before they got infected by W32.trojan.Elop.m$.wp
      No coming back now. A 10 year deal ffs.

      • Luka Mlinar

        Yea it sucks. I don’t want to be the one to post this cliche comment but it feels like i should: RIP Nokia :’(

        • Chibuzor Ifediorah

          Truely the Death of a BRAND.

      • manchester

        LOL, is that a new trojan detected by kaspersky ? :D

        • OMGgary

          Yes, but Microsoft Security Essentials thinks it is a false positive and lets it run at hardware abstraction layer.

    • Rooney-

      Thank god! No more camera ads mocking others!

    • Sharath

      Microsoft+Nokia = Mokia :P

    • Roberto Tomás

      I heard they wanted to buy the entire company, but the asking price ws close to a trillion us dollars !! — apparently they have a lot of good tech going into other things like cars too

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