Microsoft to acquire Nokia’s devices business in €5.4bn cash transaction

3 Sep 2013

Nokia CEO Stephen Elop launches the Nokia Lumia 1020 in New York on 11 July 2013

The inevitable has happened. Microsoft’s deepening relationship with Nokia as seen by the fact that the majority of all Windows Phone devices sold in the last quarter were Nokia devices has been consummated – Microsoft is to buy Nokia’s devices business lock, stock and barrel for €5.4bn. Microsoft is now a mobile manufacturer.

Under the terms of the agreement, Microsoft will pay €3.79bn to purchase Nokia’s Devices and Services business and €1.65bn to license Nokia’s patents – the total transaction works out at €5.44bn in cash.

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.

“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, who recently announced his intention to retire in the coming years.

“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 honoured 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 (fiscal year 2015), and we see significant long-term revenue and profit opportunities for our shareholders.”

Smartphone sales

According to the most recent quarterly analysis from IDC, Windows Phone was propelled to third place in the world after Android and Apple’s iOS respectively in terms of smartphones sold. Windows Phone posted the largest year-over-year increase among the top 5 smartphone platforms with 8.7m devices sold. Driving this result was Nokia, which released two new smartphones and grew its presence at multiple mobile operators. Nokia accounted for 81.6pc of all Windows Phone smartphone shipments during the second quarter of 2013.

“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, a former Microsoft senior executive 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.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years