Microsoft is spending $7.2 billion to buy Nokia’s smartphone business. Nokia (NOK) will retain its Nokia Solutions and Networks infrastructure business (NSN), its Nokia HERE mapping tool, and its patents, which Microsoft will continue to license. The Finnish company says the deal will close during the first quarter of next year, and will be accretive to earnings.
The takeover had been expected by some ever since Nokia hired Stephen Elop from Microsoft in 2010 and abandoned its Symbian operating system in favor of Microsoft’s Windows. Now Elop is returning to Microsoft, where he will be a candidate to succeed outgoing Microsoft CEO Steven Ballmer. At Nokia, Elop was the subject of considerable criticism from detractors who questioned his close alliance with Microsoft, but now he is poised to control the world’s largest software company as well as one of the most venerable brands in the smartphone world.
Nokia was the world’s top maker of mobile phones until last year, when it ceded that title to Samsung. Smartphones now outsell feature phones, and Nokia has been late to the smartphone party. Apple’s name is now synonymous with innovative design and groundbreaking handset technology, and Samsung is the undisputed sales leader. Nokia wants to reclaim all those distinctions, and Microsoft is determined to be a force in mobile software just as it has dominated software for personal computers. The two companies have seen Windows devices as the key to realizing their ambitions, but although they share a common goal, their cultures are very different. Steven Ballmer has said that their attempts to cooperate have produced some friction.
Nokia sold 7.4 million Lumia smartphones during the second quarter, roughly 25% as many smartphones as Apple sold during the same period. (Samsung does not break out smartphone sales in quarterly reports.) The phone has suffered from a relatively small set of applications available for the Windows operating system. At last count there were roughly 156,000 apps available in the Windows app store, versus more than 617,000 available in the iTunes store and 484,000 in the Google Play store.
The companies said that roughly one third of Nokia’s workforce of 90,000 will transfer to Microsoft. Of the 32,000 employees moving to Microsoft, about 4,700 are in Finland and will remain there. The companies did not say whether other Finland-based employees will be asked to move, or whether the takeover will result in layoffs. Nokia has already laid off roughly 10,000 people since Elop came in as CEO.
Wall Street clearly thinks Nokia is getting the better end of the deal. Nokia stock rose almost 40% this morning, while share of Microsoft lost about 6%.
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