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Microsoft to buy Nokia's wireless segment for $7.2B

updated 12:37 am EDT, Tue September 3, 2013

Microsoft makes big step into mobile with Nokia buy

Software giant Microsoft continued its transformation into a devices and services entity on Tuesday, announcing that it would buy the mobile phone operations of troubled Finnish manufacturer Nokia. Microsoft confirmed the deal to Reuters on Tuesday. The Nokia buy will cost the Redmond giant roughly $7.2 billion, and the deal should close by the first quarter of 2014.

"It's a bold step into the future -- a win-win for employees, shareholders and consumers of both companies," Microsoft's Steve Ballmer, said in a statement. Ballmer is slated to step down from his role as chief executive within 12 months, and no replacement has been found.

"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."

After announcing the acquisition, Microsoft released a document laying out its strategic rationale for the buy. The document calls the buy a "smart acquisition," noting that it will strengthen Microsoft's overall opportunity in the segment and accelerate growth in the Windows Phone platform's market share.

Reportedly, Nokia's current CEO, Stephen Elop, will step down as part of the deal. Elop is expected to take on the role of Microsoft's "Nokia Executive Vice President of Devices & Services." Elop has also been mentioned as a potential replacement for Ballmer in the head role at Microsoft, though neither company has commented on that possibility.

The deal will also see Microsoft forging a 10-year licensing agreement with Nokia to use the company's brand on cellular devices, a move that is something of a necessity given Nokia's stature in the mobile market and Microsoft's comparative lack of stature in that segment. Microsoft will also acquire more than 8,500 design patents, as well as 30,000 utility and patents pending. Nokia's Lumia and Asha brands will fall under the 10-year license.

Two years ago, Nokia undertook a "bet the company" strategy, aligning itself closely with Microsoft's Windows Phone platform in the face of growing competition from Apple's iPhone and devices running Google's Android operating system Once a ruler of the mobile handset market, Nokia has fared poorly in the time since, as consumers have opted for iOS and Android-powered smartphones, leaving the Finnish company struggling to keep up.

The partnership between the two companies has occasionally resulted in financial support from Microsoft to Nokia. In January of last year, Microsoft paid Nokia $250 million in order to support the phone maker's continuing efforts to popularize the Windows Phone platform. Nokia to date appears to be the only manufacturer moving significant numbers of Windows Phone units, selling 7.4 million Lumia devices last quarter even as it lost $151 million.

Nokia has stayed the course, though, releasing a number of Windows Phone 8-powered devices across a range of price points. Currently, the firm is believed to be working on a phablet-like device with a 6-inch display, hoping to capitalize on the desire among some consumers for larger-screened devices.

As Nokia has struggled, many observers have speculated that the company was ripe for an acquisition, and Microsoft has been continually bandied about as a likely buyer. The Windows maker has not only the cash reserves to make such a buy, but also the motivation. Given the accelerating decline of the traditional PC market and evident consumer interest in smartphones and tablets, buying Nokia may give Microsoft better footing to reorient itself to the new computing paradigm. At the very least, the acquisition will likely help Microsoft to integrate its software operations with mobile phone design.

Having bought Nokia, Microsoft now has a foothold in the two major components of modern computing: smartphones and tablets. Nokia had been rumored to be working on its own Windows RT-powered tablet, though that device's future is uncertain given Microsoft's own efforts in that segment with its Windows RT and Windows 8-powered Surface devices.

With its devices and services segments now under Microsoft's control, Nokia will look to further develop its mapping platform. An accompanying statement from the company laid out its plans going forward, saying that it aims to become the "leading independent location cloud platform company, offering mapping and location services across different screens and operating systems." Nokia will also continue to develop its operations in the network services market, as well as to build LTE networks and work on other advanced technologies such as sensing and material tech. Roughly 32,000 Nokia employees -- including 4,700 in Finland and 18,300 directly involved in manufacturing, assembly, and packaging worldwide -- will now become Microsoft employees.



By Electronista Staff
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Comments

  1. pairof9s

    Mac Enthusiast

    Joined: 01-03-08

    Throwing good money after bad

  1. Wingsy

    Fresh-Faced Recruit

    Joined: 04-14-05

    I guess this makes it official: No one will be making Windows phones from now on other than Nokia... er... Microsoft.

  1. MacScientist

    Junior Member

    Joined: 02-14-00

    Look at it this way. Microsoft had been losing a little money by occasionally propping-up Nokia. Now, it has the opportunity to lose a lot of money. Having now gone into direct competition with its hardware partners for Windows Phone, at least it will not have to worry about increasing revenue from Windows Phone license fees.

    All in all, this is a very typical Microsoft solution--take a bad situation and turn it into a disaster.

  1. coffeetime

    Mac Enthusiast

    Joined: 11-15-06

    Prediction: in 2 years, MS will close doown Nokia due to nothing profitable. Or HP / Dell will buy it from MS and then kill it in two months because their products don't sell.

  1. kerryb

    Fresh-Faced Recruit

    Joined: 08-05-01

    Interested to see how Wall Street reacts to this news.

  1. Mr. Strat

    Junior Member

    Joined: 01-23-02

    A bad business decision by a poor executive who's on his way out the door.

  1. abnyc

    Fresh-Faced Recruit

    Joined: 09-28-00

    100%. Absolutely. A complete waste of $. They should have purchased Blackberry instead. It would have been 1/2 cheaper and you wouldn't have to force feed a non business name like nokia down businesses throats. It's not too late to change course but MS is just too damn dumb to realize that. A reworked BB OS is a better bet for MS and windows folks than this win 8 crapola !!. This is great news !!!

  1. Makosuke

    Forum Regular

    Joined: 08-06-01

    The fact is they didn't have a choice at this point. Sales were a joke by MS standards, for all practical purposes the only company making Windows Phones was Nokia, and it was only a matter of time before the company died. MS's only choice was to absorb Nokia, keep whatever profits there might be from the currently-meager handset sales for themselves, and hope that they can turn themselves into Apple.

    They managed to succeed doing something similar with the XBox, but the difference was that their "competition" back then was Sony, whose corporate hobby remains shooting itself in the foot while insulting its own customers, and Sega, and they had their fat Windows/Office monopoly to feed the beast.

    Now they're up against the Google/Samsung/Android juggernaut on one end, and Apple, a company that makes more money selling phones than MS makes off of everything, period, on the other. And both of those are actively assaulting the non-corporate half of MS's core business.

    Point being, MS is in a very bad position, but for all its warts they HAD to buy Nokia to have any chance in this fight.

  1. Flying Meat

    Dedicated MacNNer

    Joined: 01-25-07

    A new division will be known as Microkia. ;)

  1. Flying Meat

    Dedicated MacNNer

    Joined: 01-25-07

    A new division will be known as Microkia. ;)
    And, uh, everything will be brown.

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    Wasn't this the obvious move?

    Elop moves from MS to Nokia.

    Nokia goes Windows Phone-exclusive. It seemed inevitable back then (not just to Gruber) that MS would buy them eventually.

    Nokias sales don't improve, and nobody else makes Windows Phone devices.

    Ballmer is fired after having misjudged the mobile market, and after all potential CEO candidates have left the company after quarreling with Balmer.

    Microsoft buys Nokia, and brings Elop back into the company.

    Suddenly, Microsoft has an in-house mobile hardware division, and a CEO candidate.

    Science!? Hardly,

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