Early Tuesday morning, Microsoft announced that it would be purchasing Nokia’s devices and services business. The transaction has been approved by the Boards of Directors for both companies, and is expected to close in Q1 of next year, pending regulatory approval.
As for the terms of the deal, Microsoft is paying EUR 3.79 billion to purchase substantially all of Nokia’s cell phone business, and EUR 1.65 billion to license the company’s patents, for a total price of EUR 5.44 billion (or roughly $7.2 billion in US dollars) in cash…
From Microsoft’s press release:
“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.”
The move will build on the current “strategic partnership” between the two companies, which was announced back in February 2011. And it will not only help Nokia strengthen its financial position, but also help Microsoft further unify its mobile software, hardware and services.
Here’s Stephen Elop on the deal:
“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.”
While the news is significant, it’s not surprising. Aside from the fact that the two firms have a long-standing relationship, Nokia has been the premier manufacturer of Windows Phone hardware, and has seen strong success in recent quarters with its Lumia handsets.
Microsoft, on the other hand, has shown some interest in creating its own mobile devices, but has yet to do so successfully. The Redmond-based company took a nearly $1 billion hit last quarter due to unsold Surface inventory, and it continues to struggle to sell the tablet.
It’ll be interesting to see what comes of this major acquisition, but it could be a while. The whole thing is reminiscent of Google’s $12.5 billion purchase of Motorola last year, and of course we have yet to see the fruit of that deal outside of the recently-announced Moto X device.