Microsoft is moving forward with a deal to purchase Nokia's Devices and Services business for $7.2 billion (€5.44 billion).
The Finnish hardware maker's mobile phone division has been struggling since the dawn of the smartphone era, recently reporting a $150 million revenue loss even after surging sales of its Lumia line of Windows Phone 8 smartphones.
For Microsoft, the acquisition is an opportunity to unify its mobile brand. Aside from the HTC 8X, all licensed Windows Phone 8 devices are Nokia-made. So now, instead of seeing Nokia ads for individual devices and Microsoft ads for the mobile operating system, we will likely see combined marketing.
From Microsoft's press release:
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.
[...]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.
[...] 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.
By selling its mobile phone division, Nokia is using the opportunity to trim away a profitless part of the company to focus on other, more lucrative areas like its telecommunication and mapping technology.
From Nokia's press release:
Following the transaction, Nokia plans to focus on its three established businesses, each of which is a leader in enabling mobility in its respective market segment: NSN, a leader in network infrastructure and services; HERE, a leader in mapping and location services; and Advanced Technologies, a leader in technology development and licensing. At closing, this transaction is expected to strengthen Nokia's financial position and provide a solid basis for future investment in these three businesses.
The acquisition is expected to close in the first quarter of 2014, allowing Microsoft to speed up the progress of its Windows Phone 8 devices. Retiring Microsoft CEO Steve Ballmer has said that sharing intellectual property rights between the two companies has slowed down development in the past.
With 32,000 new Nokia employees across technology and production teams, Microsoft will have the entire Lumia staff at its disposal.
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