Microsoft is to buy Nokia’s Phone business in a deal worth $7.2 billion.
The acquisition is a logical move by Microsoft in transforming itself into what CEO Steve Ballmer calls a devices and services company, rather than a software company.
Microsoft will pay $5 billion for Nokia’s Devices and Services Business. In addition, it is paying about $2.18 billion to license Nokia’s patents and to license and use Nokia’s mapping services.
The businesses that Microsoft is buying from Nokia attracted reveneue of $19.7 billion in 2012, representing about half of Nokia’s sales that year.
Nokia will keep other substantial parts of its business, including networking infrastructure and services, technology development and licensing, and mapping and location services.
Giving his reason for acting now Steve Ballmer said, ‘To accelerate our growth in the phone business, we thought it was important to move even faster.’ Ballmer said ‘With the acquisition, instead of having to go through two companies for each innovation or marketing move, we remove any boundaries in agility.’
Microsoft and Nokia, have been in partnership competing with Apple and Google Android phones, since February 2011 when Nokia said it would make Windows Phone its primary smartphone operating system. Its Lumia line of Windows Phone has been credited with Windows Phone’s gain over the past several months.
“We’ve been working very well together. But at the end of the day, we’re two companies that need to protect relative value for their shareholders,” Ballmer said.
Nokia CEO Stephen Elop is leaving Nokia to become executive vice president of what will be Microsoft’s Devices & Services division. Once the transition is complete the devices division will include Windows Phone, as well as Xbox and Surface. Julie Larson-Green, who is now the executive vice president in charge of the Devices & Studios division at Microsoft, will report to Elop.
Before going to Nokia, Elop was president of Microsoft’s Business division, the unit that handles Microsoft Office and other products. His name has come up frequently as a potential successor to Ballmer, who announced last month that he would be retiring once his successor has been chosen within 12 months.
With Elop’s move back to Microsoft, ‘Stephen will go from external [candidate] to internal,’ Ballmer said. ‘The board will continue [to look at] all appropriate candidates through that process.’
Most of Nokia’s employees will stay where they are. After the deal goes through, the 32,000 employees in Nokia’s Devices & Services division — slightly more than half of them working in manufacturing and assembly in Nokia’s production facilities around the world — will still work in those facilities but will work for Microsoft. About 4,700 work in Finland in research and development, engineering, design and operations and will remain there.