Nokia Lumia 920 featuring Windows Phone 8 Photo: Reuters
It has finally happened. Nokia Corporation has announced that it has "signed an agreement to enter into a transaction" whereby it will "sell substantially all of its Devices & Services business and licence its patents to Microsoft for 5.44 billion euros in cash, payable at closing". This will integrate the Microsoft's Windows Phone operating system with its largest hardware vendor by far.
While the deal will make Microsoft a big time hardware player, Nokia will shift focus to technologies and software. "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," a release said. At closing, this transaction is expected to strengthen Nokia's financial position and provide a solid basis for future investment in these three businesses.
"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," said Risto Siilasmaa, Chairman of the Nokia Board of Directors and, following today's announcement, also Nokia interim CEO.
The deal will give Microsoft 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 production facilities, sales and marketing activities, and related support functions. At closing, approximately 32,000 people are expected to transfer to Microsoft, including approximately 4,700 people in Finland. Nokia's Chief Technology Office will remain within the Nokia Group.
The operations that are planned to be transferred to Microsoft generated an estimated 14.9 billion euros, or almost 50%, of Nokia's net sales for 2012, the release added. As part of the transaction, Nokia will grant Microsoft a 10 year non-exclusive license to its patents as of the time of the closing, and Microsoft will grant Nokia reciprocal rights related to HERE services. Additionally, Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four year license, thus filling in for the revenue stream HERE is currently receiving from Nokia's devices & services business.
Microsoft will immediately pay 1.5 billion euros of financing in the form of three 500 million euros tranches of convertible bonds to be issued by Nokia maturing in 5, 6 and 7 years respectively.
Nokia will retain its headquarters in Finland. "Today is an important moment of change and reinvention for Nokia and its employees," said Nokia Chairman and interim CEO Siilasmaa. "With our strong corporate identity, leading assets and talent, and from a position of renewed financial strength, we will build Nokia's next chapter."
While Nokia is the top phone vendor in India, it is fourth in the smartphone market with just a 5 per cent market share.
When contacted, Nokia India said it has nothing more to add to the release from Finland.