Microsoft has announced that it will acquire “substantially all” of Nokia’s devices and services division, license the Finnish company’s patents, and license and use its Here mapping services for a combined €5.44 billion (or $7.2 billion). The two companies say that the deal is expected to close in 2014.
The purchase means that Microsoft will soon own not only all of Nokia’s Lumia line of Windows Phone smartphones, but its popular Asha line of feature phones as well. Microsoft says that it will license the Nokia brand for current Nokia phones, that it will be granted a 10-year license to Nokia’s patent portfolio, and that it will become the “strategic licensee” of Nokia’s Here mapping services.
The move drastically reduces the size of Nokia, which will now focus on developing the aforementioned Here platform, its NSN networking business and its advanced technologies wing. Some 32,000 employees will transfer from Nokia to Microsoft as part of the deal.
Also as part of the transaction, current Nokia CEO Stephen Elop will depart from the company to rejoin Microsoft. As of today, he is now Nokia’s executive vice president of devices and services, but he will lead Microsoft’s mobile devices business when the transaction closes. At that time, Microsoft’s current Devices and Studios division will be expanded, and its current head, Julie Larson-Green, will report to Elop. Nokia has named Risto Siilasmaa as its interim CEO in the wake of Elop’s resignation.
The deal marks a pivotal point for the future of Microsoft’s mobile phone business. The Redmond firm has said for several months now that it plans on turning itself into a “devices and services company” (similar to Apple), rather than the leading PC software company in a time when PCs’ influence is fading. It has built its own Surface tablets, reorganized its entire business and announced the hiring of a new CEO to help itself get there. But now, for $7.2 billion, it’s hoping that it can buy its way into completing that vision faster.
“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 Microsoft CEO Steve Ballmer in a statement.
“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.”
Microsoft has famously fallen behind other tech titans like Apple and Google in the mobile arena over the past few years. Its Windows Phone OS is showing minor growth, but still lags far behind Android and iOS in terms of global market share. But by taking over the mobile operations of Nokia, who has long been its most committed Windows Phone manufacturer, it will have complete control over a much more expansive range of smartphones and feature phones that are already used and can be leveraged to convert more people onto Microsoft’s mobile OS.
Whether or not Nokia’s phones will prove more popular under the control of Microsoft, and whether or not Windows Phone will ever catch on with the masses, is still undecided. But either way, one mobile giant is now a shell of itself, while one software giant is now making a major play to shake up its business.