Monday, September 2, 2013

Microsoft to acquire Nokia Devices & Services for $7.1 Billion

Microsoft plans to acquire Nokia’s Devices & Services business in a deal valued at EUR 5.44 billion (US$7.1 billion) in cash.

The deal includes all of the Mobile Phones and Smart Devices business units as well as Nokia's design team, operations including all Nokia Devices & Services 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 approximately 4,700 people in Finland.

Following the sale, Nokia plans to focus on its NSN, HERE (mapping and location services) and Advanced Technologies (R&D and patent licensing) businesses.  Nokia's CTO (Chief Technology Office) organization and patent portfolio will remain within the Nokia Group.

Some additional highlights:

  • Nokia will grant Microsoft a 10 year non-exclusive license to its patents as of the time of the closing.  This includes over 8,500 design patents relevant to the hundreds of Nokia handset models.
  • Microsoft will grant Nokia reciprocal rights related to HERE services.
  • Nokia will grant Microsoft an option to extend this mutual patent agreement to perpetuity.
  • Microsoft acquires Nokia's Qualcomm license
  • Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four year license. Microsoft sees tremendous potential for integrating HERE geospatial data into its full range of online services
  • Microsoft has agreed to make immediately available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible bonds to be issued by Nokia maturing in 5, 6 and 7 years respectively.
  • Microsoft has agreed to a 10 year license arrangement with Nokia to use the Nokia brand on current Mobile Phones products.
  • To avoid the perception of any potential conflict of interest between now and the pending closure of the transaction, Stephen Elop will step aside as President and CEO of Nokia Corporation, resign from the Board of Directors, and will become Executive Vice President, Devices & Services.
  • Risto Siilasmaa will assume an interim CEO role for Nokia while continuing to serve in his role as Chairman of the Nokia Board of Directors. He will oversee strategy and have four direct reports: Michael Halbherr, Executive Vice President, HERE; Stephen Elop, Executive Vice President, Devices & Services; Timo Ihamuotila, Nokia CFO and interim President; and Jesper Ovesen, Executive Chairman of the NSN Board of Directors.
"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," said Risto Siilasmaa, Chairman of the Nokia Board of Directors and, following today's announcement, also Nokia interim CEO.

Microsoft said having "one brand, one united voice" for Windows Phone will help its marketing efforts.
The companies believe they can get the deal completed by early 2014.

“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.”