Microsoft to buy Nokia’s devices and services business

by Mark Tyson on 3 September 2013, 10:17

Tags: Windows Phone, Nokia (NYSE:NOK)

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It has been announced that Microsoft will acquire Nokia’s devices and services business. The deal, worth $7.2 billion, is seen by Microsoft as a way to accelerate the growth and secure the future of the Windows Phone platform. Looking at how much was paid for what; around $5 billion will secure the Nokia devices division and the other $2.2 billion buys the rights to use Nokia and associated patents.

The deal is nicely outlined in the Microsoft presentation slide below.

As the Nokia devices division and services becomes part of Microsoft the current Nokia CEO, Stephen Elop will step down and become Executive Vice President of this division within Microsoft. 32,000 other Nokia employees will transfer to Microsoft including nearly 5,000 in Finland. Within Microsoft Julie Larson-Green, who is currently in charge of devices at Redmond will focus upon the Xbox One and Surface but will be part of Elop’s team when the deal comes together.

Nokia will not disappear as the firm will retain its patent portfolio, which it has agreed to license to Microsoft for the next 10 years, Nokia Solutions and Networks, Nokia Here and its CTO office.

Why did Microsoft buy Nokia’s devices and services?

Microsoft has produced a presentation called “Accelerating Growth: Microsoft’s strategic rationale for deal announced with Nokia on September 3, 2013”. It’s available as a PDF and can be downloaded here.

The main thrust of Microsoft’s arguments for acquiring Nokia’s device and services unit are discussed under the following headings; “accelerate phone share, strengthen overall opportunity, smart acquisition and strong execution plan”.

Interestingly Microsoft has revealed, through details about this deal, that it makes less than $10 per Windows Phone unit sold. After the deal it should be able to make over $40 per device. Projecting ahead to 2018 Microsoft also believes that Windows Phone can account for 15 per cent of the smartphone market which will ship 1.7 billion units in that year. If these estimates are correct then the mobile division will be able to contribute $45 billion to Microsoft coffers.

Microsoft believes it has a strong execution plan and will make the transition as smooth as possible making the best use of current Nokia execs, R&D and sales teams.

Recent figures have shown good growth for Windows Phone and it is outselling Blackberry in 34 markets and has over 10 per cent share in nine markets at the time of writing. Microsoft also believes one brand with a unified voice can help make Windows Phone a bigger success. The greater success of Windows Phones will also strengthen Microsoft and its OEMs by offering a family of devices with integrated services reasons Microsoft.

Steve Ballmer and Stephen Elop said, in a joint statement, "Today's agreement will accelerate the momentum of Nokia's devices and services, bringing the world's most innovative smartphones to more people, while continuing to connect the next billion people with Nokia's mobile phone portfolio." The deal is expected to finalise in Q1 2014 but it is still subject to Nokia shareholder approval (the vote is on 14th November) and market regulator approval.



HEXUS Forums :: 31 Comments

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Considering Microsoft's performance of late…
less said the better
And the incentive for companies like HTC to continue competing with Nokia (now directly with MS) is what exactly?

MS are trying to be Apple…
Well, expect more competition now. Just like with the Sony acquisition recently, this means Microsoft can forge on with better handsets now.

By the time my HTC One contract comes up for renewal, there is now a chance a Windows phone may have some appeal to me.
Projecting ahead to 2018 Microsoft also believes that Windows Phone can account for 15 per cent of the smartphone market which will ship 1.7 billion units in that year.
If they're going to do this by launching compelling devices then they'll get a big thumbs up from me. On the other hand if they're going to “leverage” that “Microsoft acquires Nokia's Qualcomm, other key IP licenses” to screw over Android (and Apple?) for patent licensing then they deserve spectacular failure in my book.
. Microsoft also believes one brand with a unified voice can help make Windows Phone a bigger success. The greater success of Windows Phones will also strengthen Microsoft and its OEMs by offering a family of devices with integrated services reasons Microsoft.
I really can't see how they're going to do this. Unlike Google/Motorola/Android the Nokia/Microsoft/WindowsPhone trio doesn't have any kind of open source credentials, Microsoft has VERY tight control over “their” OS. That said, apart from HTC are there any Window Phones OEM's that are doing anything of note? I looked at a Samsung Windows Phone and it was underwhelming compared to the HTC or Nokia equivalents.

There's now a 50/50 split in the house between Windows Phone and Android, and I've got to say that the HTC and Nokia Windows Phone devices that are here are actually pretty decent. Okay, I wouldn't have one of them because I need a uSD slot, but apart from that they looked okay.

Maybe this is an ideal topic for a QOTW … is the Nokia/Microsoft a good deal for the public? or would you be more likely to buy a Windows phone if it was branded “Microsoft”.
There'll be very little incentive for HTC, or anyone else, to produce Windows phones, they're on their own most likely.

Nokia have traditionally been a company to push boundaries in mobile, hard to see that happening now. Could you imagine Microsoft pushing ahead with the Pureview technology and branding, for example?