Microsoft to buy Nokia’s handset division for $7.1 billion
Microsoft made a $7.1 billion push into becoming a “devices and services” company late Monday night with the announcement that it had purchased Nokia’s Devices and Services unit.
According to a press release on Microsoft’s website, it will be purchasing Nokia’s mobile division for $5 billion ($3.79 billion Euros) as well as another $2.1 billion ($1.65 billion Euros) for its patents. All in all, this will add 32,000 people to Microsoft’s workforce. The deal is set to close in the first quarter of 2014, pending regulatory and shareholder approval.
After this deal closes, Nokia will be reduced three divisions: its network infrastructure arm called NSN, HERE, its maps and location-based services; and Advanced Technologies its licensing and development arm. Microsoft says it plans to pay Nokia for a four-year license of its HERE services.
“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,” Steve Ballmer is quoted as saying 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.”
Nokia’s current CEO, Stephen Elop, will join Microsoft as Executive VP of Devices and Services. A handful of current Nokia VPs will also make the transition to Microsoft.
Having Stephen Elop in the Microsoft ranks makes him a possible contender to Steve Ballmer, once Ballmer resigns within a year. Bookies had given Elop the best chance of taking Microsoft’s top job; these odds will likely decrease since Microsoft would be hiring from the inside should Elop be appointed to the company’s top position.
In a presentation explaining the motivation for the deal Microsoft said that it will continue to support the competing iPhone and Android platforms, but it “cannot risk having Google or Apple foreclose app innovation, integration, distribution, or economics”.
In the wake of this deal, questions linger about what will happen to manufacturers that offer Windows phones such as HTC and Huawei. Will Microsoft continue to allow them to manufacture these phones? Or will it not want to compete with itself?