And so it begins: Nokia shares already surging thanks to Microsoft takeover!
Nokia shares surged close to 50 per cent on Helsinki bourse after the Finnish giant announced the sale of its mobile phone business and patent licences to Microsoft for a 5.44 billion euros (Dh26.333 billion) in all-cash deal.
Under the terms of the agreement, Microsoft will pay 3.79 billion euros to purchase all of Nokia’s devices and services business, and a 1.65 billion euros to license Nokia’s patents.
Microsoft said in a statement 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.
Nokia will retain its patent portfolio and will grant Microsoft a 10-year licence to its patents at the time of the closing. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its maps and location-based services, named HERE.
Nokia signed a partnership with Microsoft in February 2011 to launch Lumia brand smartphones running on Windows operating systems.
According to Gartner, Nokia sold 61 million handsets in the second quarter of this year, down from 83 million units a year ago. Nokia’s Lumia sales grew 112.7 per cent in the second quarter.
“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,” Steve Ballmer, chief executive officer of Microsoft, said in a statement.
“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 Tuesday’s announcement, Nokia Interim CEO.
Stephen Elop is stepping aside as Nokia president and CEO after the announcement to become Nokia executive Vice-President of devices and services.
“I see the deal as a move by Microsoft’s Steve Ballmer to cement his realignment of Microsoft as a software and devices business prior to his departure as CEO. The move makes sense for Microsoft too, but the timing of it underscores Ballmer’s determination to leave Microsoft a fundamentally different business than what it was even last year,” Daniel Gleeson, mobile analyst at IHS electronics and media, a research firm, told Gulf News.
He said Microsoft was already funnelling a lot of cash into Nokia to support its smartphone business, with limited effect. Now Microsoft is free to throw its full weight behind developing and marketing an integrated smartphone proposition which puts it in a much stronger position to compete. Microsoft has finally accepted that it will not attain the same market on smartphone as it did on PCs and to survive as a smaller player, employing a vertical strategy is better.
“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 Elop.
Microsoft will also acquire Nokia’s feature phone brand — Asha — and will licence the Nokia brand for use with current Nokia mobile phone products.