Microsoft (NASDAQ:MSFT) will buy Nokia’s (NYSE:NOK) Devices and Services division in exchange for €5.44 billion ($7.17 billion), announced the giant software maker. Former leader in the mobile phone market will now focus on business services and networking, a decision described as “the best way to go forward, both for Nokia and for its shareholders,” said Chairman of Nokia, Risto Siilasmaa, quoted in a press release.
“We announced some exciting news today: We have entered into an agreement to purchase Nokia’s Devices & Services business, which includes their smartphone and mobile phone businesses, their award-winning design team, manufacturing and assembly facilities around the world, and teams devoted to operations, sales, marketing and support,” said yesterday evening Steve Ballmer in a letter to Microsoft employees.
Nokia completed in August the acquisition of 50% stake held by Siemens in the telecom equipment maker Nokia Siemens Networks, to develop this activity, now considered vital.
The chief executive officer of Nokia, Stephen Elop will resign and join Microsoft. Siilasmaa will temporarily take over as CEO of Nokia. Elop took over Nokia’s leadership in 2010 after working as president of Microsoft’s business division, responsible for the Office suite.
After the arrival of Elop, Nokia has partnered with Microsoft and adopted Windows Phone operating system for its smartphones, an agreement that was materialized with the launch of Lumia phones.
The transaction consists of the division in charge with developing and making mobile phones for €3.79 billion ($5 billion), and the portfolio of Nokia patents, amounting to €1.65 billion ($2.17 billion), according to a statement issued by the two companies. Microsoft also continues the transition to making mobile devices since Windows prospects are threatened by consumer migration to smartphones and tablets, a market dominated by Apple, Google and Android device manufacturers.
Nokia, which has dominated the mobile phone market for 14 years, has financial problems due to the steep decline in sales after delayed for several years to bring to the market a credible competitor for iPhone and Android smartphones. The sales volume of mobile phones in the second quarter fell by 27 percent for Nokia compared to the same period last year, and the Finnish company had combined losses of €5 billion in the last nine quarters. The transaction will be completed in the first quarter of next year, after the approval from shareholders and regulators.
About 32,000 Nokia employees will be transferred to Microsoft after the transaction, according to a joint statement. Nokia division of mobile phones and related services generated approximately 50 percent of company’s net sales in 2012, estimated at €15 billion business.
Steve Ballmer recently announced that he will step down as CEO of Microsoft in the next 12 months, after 14 years at the helm of the largest software maker. The company has not yet announced a replacement for him.
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