Software giant Microsoft is set to buy Nokia's handset business in a deal valued at €5.44 billion (US$7.2 billion).
Microsoft will buy almost all of the devices and services of Nokia, for €3.79 billion ($5.0 billion). In addition Microsoft will pay €1.65 billion ($2.2 billion) to license many of Nokia's patents on terms varying between four and ten years. Microsoft is also going to make available to Nokia up to €1.5 billion ($2 billion) in funding options.
The deal is expected to close in the first quarter of 2014 subject to Nokia shareholder approval, regulatory approval, and other closing conditions, the companies said in a joint
For a number of years Nokia was the market leader in handsets with 40 percent of all global sales, but since the advent of the smartphone the company has steadily lost market share and been taking financial losses. In an attempt to reverse the trend Nokia announced in February 2011 that it would adopt the Windows Phone platform from Microsoft as its primary platform. Although Nokia has had some success with its Lumia brand, it has not been enough to pull the company into consistent profitability.
Nokia's Lumia handset is a Windows Phone and becomes a Microsoft phone.
While Microsoft will acquire a functioning handset business, including the Lumia and Asha phone brands and a licensing agreement with Qualcomm, Nokia's continuing business will focus on its remaining businesses that enable mobile communications. These are NSN, formerly known as Nokia Siemens Networks, a provider of network infrastructure and services; HERE mapping and location services; and its technology development and licensing group.
As part of the deal a number of senior executives are expected to transfer from Nokia to Microsoft, including CEO Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber. In all, the deal will involve the transfer of 32,000 people to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly, and packaging of products. The operations that are transferring to Microsoft were responsible for about half of Nokia's revenue in 2012, or €14.9 billion ($19.7 billion).
"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, CEO of Microsoft, in the press release.
"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 interim CEO.
In addition, Microsoft announced that it would spend more than $250 million over the next few years building a datacenter in Finland to serve Microsoft customers in Europe, with the potential for future expansion.