Microsoft Corporation and Nokia Corporation has
announced that the Boards of Directors for both companies have decided to enter
into a transaction whereby Microsoft will purchase substantially all of Nokia’s
Devices & Services business, license Nokia’s patents, and license and use
Nokia’s mapping services.
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. Microsoft will draw upon its
overseas cash resources to fund the transaction. The transaction is expected to
close in the first quarter of 2014, subject to approval by Nokia’s
shareholders, regulatory approvals and other closing conditions.
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.
“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.”
“We are excited and honored to be bringing Nokia’s
incredible people, technologies and assets into our Microsoft family. Given our
long partnership with Nokia and the many key Nokia leaders that are joining
Microsoft, we anticipate a smooth transition and great execution,” Ballmer
said. “With ongoing share growth and the synergies across marketing, branding
and advertising, we expect this acquisition to be accretive to our adjusted
earnings per share starting in FY15, and we see significant long-term revenue
and profit opportunities for our shareholders.”
“For Nokia, this is an important moment of
reinvention and from a position of financial strength, we can build our next
chapter,” said Risto Siilasmaa, Chairman of the Nokia Board of Directors and,
following today’s announcement, Nokia Interim CEO. “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. Additionally, the deal offers future opportunities for
many Nokia employees as part of a company with the strategy, financial
resources and determination to succeed in the mobile space.”
“Building on our successful partnership, we can now
bring together the best of Microsoft’s software engineering with the best of
Nokia’s product engineering, award-winning design, and global sales, marketing
and manufacturing,” said Stephen Elop, who following today’s announcement is
stepping aside as Nokia President and CEO to become Nokia Executive Vice
President of Devices & Services. “With this combination of talented people,
we have the opportunity to accelerate the current momentum and cutting-edge
innovation of both our smart devices and mobile phone products.”
Nokia has outlined its expected focus upon the
closing of the transaction in a separate press release published today.
Under the terms of the agreement, Microsoft will
acquire substantially all of Nokia’s Devices and Services business, including
the Mobile Phones and Smart Devices business units as well as an
industry-leading design team, operations including all Nokia Devices &
Services-related 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 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.
As part of the transaction, Nokia is assigning to
Microsoft its long-term patent licensing agreement with Qualcomm, as well as
other licensing agreements. Microsoft is also acquiring Nokia’s Mobile Phones
business unit, which serves hundreds of millions of customers worldwide, and
had sales of 53.7 million units in the second quarter of 2013. Microsoft will
acquire the Asha brand and will license the Nokia brand for use with current
Nokia mobile phone products. Nokia will continue to own and manage the Nokia
brand. This element provides Microsoft with the opportunity to extend its
service offerings to a far wider group around the world while allowing Nokia’s mobile
phones to serve as an on-ramp to Windows Phone.
Nokia will retain its patent portfolio and will
grant Microsoft a 10-year license to its patents at the time of the closing.
Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its
HERE services. In addition, Nokia will grant Microsoft an option to extend this
mutual patent agreement in perpetuity. In addition, Microsoft will become a
strategic licensee of the HERE platform, and will separately pay Nokia for a
four-year license.