September 3, 2013
Microsoft Acquires Nokia Handset Division For $7.2 Billion
Michael Harper for redOrbit.com - Your Universe Online
Microsoft has agreed to buy Nokia’s handset division and patent portfolio for $7.2 billion. Though the deal adds some 32,000 new employees to Microsoft’s roster, a remaining 56,000 Nokia employees will not be transitioning.
The two companies have been partners since February 2011 when Nokia agreed to focus its attention on creating phones for the Windows Phone platform, a move which it hoped would increase its standings in the smartphone wars. Some 31 months later the two companies are becoming one, giving Microsoft some patent firepower to its arsenal and a new business hub in Europe.
Former Nokia CEO Stephen Elop has also announced his resignation from his position to avoid any conflicts of interest, leaving him a possible replacement for Microsoft’s Steve Ballmer, who announced his resignation last month.
“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,” explained Ballmer in a statement following the announcement. He later explained there were some legal and logistical aspects of the earlier partnership between the two companies which prevented them from working most efficiently together. As a result, said Ballmer, some of the products suffered, particularly when it came to naming them.
“Just think about the Nokia Lumia Windows Phone 1020 and you will that know [sic] we can make simpler clearer messages to the market,” said Ballmer in an interview with All Things D.
The deal to unite these two businesses is two-fold. The Washington-based company is buying up Nokia’s core cell phone business — including its feature phone divisions — for $5 billion. The remaining $2.18 billion will be paid out as part of a licensing deal that will give Microsoft non-exclusive rights to Nokia’s patents for ten years. Microsoft has an option to continue the agreement after the initial ten years and will also license Nokia’s location-based business Here, becoming its largest partner.
Last week Nokia announced the addition of Here Auto, integrating its maps and location business into automobiles. Nokia will continue to focus on its Here business as well as its other communications divisions. Shares of Nokia stock spiked on the news, jumping 40 percent in early trading in Helsinki.
In the last five years Android and Apple have become the main frontrunners in the smartphone race. In fact, they’ve become so popular that few other companies, including Microsoft and Nokia, have been able to reclaim their lost market share.
Last June the International Data Corporation (IDC) had high hopes for the Windows Phone and Nokia partnership, saying the platform will outperform Apple to become the number two OS behind Android by 2016. More recent numbers show Windows Phone has grown since last year, but looks unable to overtake Apple in the next three years. Unfortunately, IDC believes Microsoft's partnership with Nokia could be holding the software giant back as other manufacturers like Lenovo and Samsung focus much of their attention on building Android phones.
Nokia’s interim CEO Risto Siilasmaa said in a statement that while it wasn’t easy to sell Nokia — seen by many as the final shoe to drop for the once great cell phone maker — it was the best decision for the company.
“Selling businesses is not nearly as cool, but sometimes it is the right course of action,” said Siilasmaa. “Nokia alone does not have the resources.”