Microsoft to acquire Nokia's Devices & Services for $7.17 billion
Stock Exchange Release
September 3, 2013 at 06.00 (CET +1)
REDMOND, Washington and ESPOO, Finland - Microsoft Corporation and Nokia Corporation today 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.
TERMS OF THE AGREEMENT
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 non-exclusive 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.
Microsoft will also immediately make available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible notes that Microsoft would fund from overseas resources. If Nokia decides to draw down on this financing option, Nokia would pay back these notes to Microsoft from the proceeds of the deal upon closing. The financing is not conditional on the transaction closing.
Microsoft also announced that it has selected Finland as the home for a new data center that will serve Microsoft consumers in Europe. The company said it would invest more than a quarter-billion dollars in capital and operation of the new data center over the next few years, with the potential for further expansion over time.
NOKIA LEADERSHIP CHANGES
Nokia expects that Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber would transfer to Microsoft at the anticipated closing of the transaction. Nokia has outlined these changes in more detail in a separate release issued today.
EXTRAORDINARY SHAREHOLDERS MEETING
Nokia plans to hold an Extraordinary General Meeting on November 19, 2013. The notice of the meeting and more information on the transaction and its background are planned to be published later this month.
Nokia will host a press conference today, Tuesday, Sept. 3, at 11 a.m. EEST in Dipoli, Espoo (Otakaari 24). Registration will start at 10 a.m., and the doors will open at 10.40 a.m. Due to space constraints, only media who show valid press credentials at the registration will be admitted. Media are encouraged to watch a live webcast of the press conference via: http://press.nokia.com/
30. Bernoulli (Posts: 1335; Member since: 01 Sep 2012)
It's still pending approval from Nokia, there's still hope...
78. james004 (limited) (Posts: 410; Member since: 15 May 2013)
who in correct mind would sell their $30 billion company for $5 billion?
79. neutralguy (Posts: 1152; Member since: 30 Apr 2012)
Who said that it's 30 billion dollar worth? Also, it's not like microsoft bought the whole company. Parts of it only.
Anyways, elop finally did his job. *ehem* trojan *ehem* horse *ehem*
80. Bernoulli (Posts: 1335; Member since: 01 Sep 2012)
Thank you, hopefully the board of investors sees that and either cancels the deal and kicks Elop out of office, asks for 3x the amount and kicks Elop out of office, or just kicks Elop out of office
101. joey_sfb (Posts: 1866; Member since: 29 Mar 2012)
much less than what Nokia pay for their map navtec division.
Nokia had fallen to elop Trojan horse.
115. tigermcm (Posts: 596; Member since: 02 Sep 2009)
nokia devices and services is not the entire nokia company
118. jromy (Posts: 110; Member since: 26 Feb 2013)
what else is there that affects us as consumers? Not trolling, just want to know.
126. tigermcm (Posts: 596; Member since: 02 Sep 2009)
I honestly dont know all of nokia but the navteq and here are not apart of the purchase
85. takeja (Posts: 35; Member since: 16 Aug 2013)
There are no hopes....
Our predictions became true:
Elop as a destroyer of Nokia to prepare the company for buying for a very low price
Now the incompetence by Microsoft will destroy the legendary Nokia completely...
Enjoy your Nokia device with NSA back doors finally officially!
43. AnTuTu (Posts: 596; Member since: 14 Oct 2012)
Great step forward.
But does Nokia worth less than Skype??? That's my only concern
56. zoom007 (unregistered)
A very sad day in the history of cellphones. 7.2 billion is way to less..Microsoft and Elop raped this amazing company..;(
61. Commentator (Posts: 2086; Member since: 16 Aug 2011)
It's a great day for PhoneArena's advertisers... so there's always that to be happy about!
66. Commentator (Posts: 2086; Member since: 16 Aug 2011)
...unless the people who are angry about this psychologically extend that anger to the banner ads they see here for XFINITY HOME, HP's Labor Day Sale and the LG G2, in which case it's a terrible day for PhoneArena's advertisers...
...I mean, that big MICROSOFT SURFACE ad at the top of this page right now can't be helping to ease the pain...
68. asingha94 (Posts: 251; Member since: 08 Apr 2012)
Don't know whether it is good or bad for future.May be it will result faster update & more development on their platform.But Nokia is good standalone.Because it has the everything & MS is going to buy it.You lost my respect Elop.Fk u Elop & Screw Microsoft.
71. asingha94 (Posts: 251; Member since: 08 Apr 2012)
I will not buy a device if it is called Microsoft Lumia 1****!!!Will buy Android further!!
82. Bernoulli (Posts: 1335; Member since: 01 Sep 2012)
Yup, eff this next device is going to be blackberry if still around, what still gets me is how did Nokia fall before blackberry...
97. Commentator (Posts: 2086; Member since: 16 Aug 2011)
Nokia didn't fall, it got bought (or rather, is in the process of being bought.)
I'd rather see a company succeed as part of a larger company than fail on its own any day. Elop presumably thinks Nokia will do better under the MS umbrella, and we'll see what the shareholders have to say. That's all there is to it.
87. blkjack (Posts: 17; Member since: 16 Aug 2013)
Did you buy any Nokia Lumia's prior to Microsoft buying part of the company?
92. Bernoulli (Posts: 1335; Member since: 01 Sep 2012)
Yes? I've had my lumias 810 and 920 for a while, along with my favorite Nokia, the 808 PureView
7. protozeloz (Posts: 5284; Member since: 16 Sep 2010)
I was expecting this to happen, after all it was the whole reason Elop was working... MS got Nokia dirt cheap
11. Commentator (Posts: 2086; Member since: 16 Aug 2011)
Heck yeah they did. Nokia's market cap is twice what MS is paying. Granted, they're not acquiring the whole thing...
17. protozeloz (Posts: 5284; Member since: 16 Sep 2010)
You could say that, but they got the important parts... This deal could have rose 16b mark, unless Nokia's market share was not translating into funds directly, but that could be hard to prove
23. Commentator (Posts: 2086; Member since: 16 Aug 2011)
Well the guys who put the deal together know a heck of a lot more than you or I do about this, so if anyone can prove it it's them.
28. protozeloz (Posts: 5284; Member since: 16 Sep 2010)
True that lol Wonder if the details will come out sooner than later, but I got shocked at the price... Though anyone would have to cough up 20b for the whole thing.... Wonder what's left of Nokia...
35. Commentator (Posts: 2086; Member since: 16 Aug 2011)
I'd assume their feature-phones division and Nokia Siemens Network are left untouched.
Here's a handy-dandy chart of their corporate structure:
46. Commentator (Posts: 2086; Member since: 16 Aug 2011)
Well, it looks like MS took their feature-phones too: "Microsoft will also be acquiring the Lumia brand name, as well as the Asha brand name, which is the more important name..."
The article now lists HERE, NSN, and Advanced Technologies as all that's left of Nokia.
99. -box- (Posts: 3537; Member since: 04 Jan 2012)
Read the whole Powerpoint (http://www.microsoft.com/en-us/news/download/press/2013/St
rategicRationalePPTX.aspx) or same info on PDF here:http://www.microsoft.com/en-us/news/Press/2013/Sep13/Strat egicRationale.aspx
Basically they're acquiring the brand names, and will license the brand names to use on the feature phones for the next 10 years, with the option to convert the 10-year license to a perpetual license. (page 23)
I reeeeeeeally hope we're not seeing the end of Nokia as a phone brand. I'd much rather see them be like Skype, where it keeps its original name but is an integrated service.
100. Commentator (Posts: 2086; Member since: 16 Aug 2011)
Without a doubt that's what they'll do. MS isn't stupid, they know the importance of the Nokia brand.
Woo! Comment 100! ... Which means that so far my 19 comments have made up 19% of those posted here!
12. Commentator (Posts: 2086; Member since: 16 Aug 2011)
All I know is we're in for a fun night of comments!
32. Bernoulli (Posts: 1335; Member since: 01 Sep 2012)
It's still pending approval from Nokia, there's still hope this doesn't go through!
38. Commentator (Posts: 2086; Member since: 16 Aug 2011)
Given the support Nokia shareholders have shown Elop in the past, I wouldn't get my hopes up...
62. Bernoulli (Posts: 1335; Member since: 01 Sep 2012)
Exactly! This is something that Elop wants, not the shareholders, they had been in talks to kick him out of office before, hopefully they do that now
107. lalalaman (Posts: 219; Member since: 19 Aug 2013)
Thats weird bt I did saw tht coming in past and now it is happening....
It is also weird in a sense that both have there maps, tablets and things coming out...thse type of unification might nt work....I hope shareholders do something.....:/
39. protozeloz (Posts: 5284; Member since: 16 Sep 2010)
I think this deal is as good as done though.....
4. protozeloz (Posts: 5284; Member since: 16 Sep 2010)
Ha i knew elop was a Trojan horse, Nokia got sold for half the price Motorola did despite being in a better position
109. lalalaman (Posts: 219; Member since: 19 Aug 2013)
It is not totally sold I guess....assets will nt b sold sothe price is low
Besides moto is doing good with os maker Google so may Nokia with ms
5. ricethief (Posts: 6; Member since: 17 Jul 2012)
I think Stephen Elop at Nokia has been a trojan horse for MS.
8. protozeloz (Posts: 5284; Member since: 16 Sep 2010)
That was obvious from the very beginning
6. Commentator (Posts: 2086; Member since: 16 Aug 2011)
One of Ballmer's last acts as CEO may end up being his most memorable. Will Elop be his successor?
It'll be interesting to see how Samsung and HTC respond to this, given their (relatively limited) investment in WP.
9. a_merryman (Posts: 510; Member since: 14 Dec 2011)
Wow, it's about time considering the relationship they've had the past couple years. But it still surprised me.
10. eman99 (Posts: 182; Member since: 03 Aug 2010)
not good very sad news damn you google you should have purchased well made nokia handsets, imagine android on them
14. protozeloz (Posts: 5284; Member since: 16 Sep 2010)
I doubt such merger will be approved, but that's where Elop plays it's game, ensuring no one would get Nokia before MS was ready
13. sats.mine2k4 (banned) (Posts: 208; Member since: 10 Aug 2012)
as planned... nokia = dum ass; ms = smart...
15. Myrith (Posts: 54; Member since: 17 Feb 2012)
So sad. I was hoping for Android on Nokia's awesome camera phones.
24. protozeloz (Posts: 5284; Member since: 16 Sep 2010)
Don't say that out loud, or the "anti lagdroid" cult will come and crucify you with their dated arguments
104. -box- (Posts: 3537; Member since: 04 Jan 2012)
That idea was shot down in 2010. Nokia considered android, found it essentially so bad they wanted to rebuild it from the ground up (which will probably happen anyway for android 5.0, if they don't rename it chrome), and google gave Nokia the metaphorical finger when they said they couldn't and wouldn't offer any support or transitional assistance. .
132. InspectorGadget80 (Posts: 5472; Member since: 26 Mar 2011)
Me to this is very sad day. Looks like we will never see a Nokia pure view Android :(
18. Commentator (Posts: 2086; Member since: 16 Aug 2011)
They bought "Devices & Services." I'm not sure what else Nokia consists of, but since they only paid $7 billion, I'm sure there's quite a bit left of old Nokia.
19. protozeloz (Posts: 5284; Member since: 16 Sep 2010)
Seems like just a portion of the mobile division
22. quyenqchau0813 (Posts: 77; Member since: 22 Mar 2013)
As far as I've known, they didn't buy the HERE Navigating division
49. MichaelHeller (Posts: 2604; Member since: 26 May 2011)
Nokia still holds onto its patents, the HERE products, and the Nokia Siemens Networks.
117. rusticguy (Posts: 2810; Member since: 11 Aug 2012)
That will go next. With M$ around in bed they don't need anyone else. It will finally be raped ... end of M$ COUPONS for Nokia like it happened with Novel :)