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Microsoft buys out Nokia’s smartphone business

Tuesday, 3rd September 2013 05:53 GMT By Brenna Hillier

Microsoft has dropped $7.2 billion to buy out Nokia’s smartphone business.

As well as a near-complete acquisition of the Devices and Services business, the deal allows Microsoft to license all Nokia’s patents and mapping services.

GamesIndustry reports the cash deal includes a €3.79 billion payment for “substantially all”and €1.65 billion for licenses, to be paid by Q1 2014.

Former Microsoft staffer and current Nokia CEO Stephen Elop will become head of the division, bringing 32,000 Nokia staff to Microsoft’s fold. Julie Larson-Green will remain head of Microsoft’s Devices and Studios team at Microsoft, which includes the Xbox 360 and Xbox One division.

Microsoft will acquire Nokia’s Smart Devices division, uncluding the Lumia brand and products, which have sold 7.4 million units. It also acquires the Mobile Phones business from Nokia, which had sales of 53.7 million units in the second quarter of 2013.

Nokia and Microsoft have been working together for more than two years and partnered to produce a couple of Lumia-branded phones; Nokia has been Microsoft’s largest hardware partner for Windows Phone 8. The purchase will not lock other hardware manufacturers out of the Windows Phone platform, however.

Microsoft boss Steve Ballmer issued a memo to employees advising them of the deal, congratulating the company on its acquisition of “incredible talent, technology and IP”.

“Clearly, greater success with phones will strengthen the overall opportunity for us and our partners to deliver on our strategy to create a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most,” he said.

Ballmer’s email is reproduced in full below:

From: Steve Ballmer

We announced some exciting news today: We have entered into an agreement to purchase Nokia’s Devices & Services business, which includes their smartphone and mobile phone businesses, their award-winning design team, manufacturing and assembly facilities around the world, and teams devoted to operations, sales, marketing and support.

For Microsoft, this is a bold step into the future and the next big phase of the transformation we announced on July 11.

We are very excited about the proposal to bring the best mobile device efforts of Microsoft and Nokia together. Our Windows Phone partnership over the past two and half years has yielded incredible work – the stunning Lumia 1020 is a great example. Our partnership has also yielded incredible growth. In fact, Nokia Windows Phones are the fastest-growing phones in the smartphone market.

Now is the time to build on this momentum and accelerate our share and profits in phones. Clearly, greater success with phones will strengthen the overall opportunity for us and our partners to deliver on our strategy to create a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most.

We have laid out Microsoft’s strategic rationale for this transaction in a presentation that I encourage you to read.

This is a smart acquisition for Microsoft, and a good deal for both companies. We are receiving incredible talent, technology and IP. We’ve all seen the amazing work that Nokia and Microsoft have done together. Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we expect a smooth transition and great execution.

As is always the case with an acquisition, the first priority is to keep driving through close, which we expect in the first quarter of 2014, following approval by Nokia’s shareholders, regulatory approvals, and other closing conditions. But I also know people will have some questions about what happens post-close. While details aren’t final, here is what we know, and how we’re generally approaching integration:

1. Stephen Elop will be coming back to Microsoft, and he will lead an expanded Devices team, which includes all of our current Devices and Studios work and most of the teams coming over from Nokia, reporting to me.

2. Julie Larson-Green will continue to run the Devices and Studios team, and will be focused on the big launches this fall including Xbox One and our Surface enhancements. Julie will be joining Stephen’s team once the acquisition closes, and will work with him to shape the new organization.

3. As part of the acquisition, a number of key engineering leaders will be joining Microsoft from Nokia, reporting to Stephen in his new capacity: Jo Harlow, who will continue to lead the Smart Devices team. Timo Toikkanen, who will continue to lead the Mobile Phones team. Stefan Pannenbecker, who will lead Design. Juha Putkiranta, who will lead the integration effort on Nokia’s behalf

4. Regarding the sales team, we plan to keep the Nokia field team, led by Chris Weber, intact and as the nexus of the devices sales effort, so that we can continue to build sales momentum. After the deal closes, Chris and his team will be placed under Kevin Turner. We will develop a single integrated team that is selling to operators, and there may be other integration opportunities that we can pursue. Kevin will work with Chris Weber and Chris Capossela to make those plans.

5. Our operating system team under Terry Myerson will continue unchanged, with a mission of supporting both first-party and third-party hardware innovation. We are committed to working with partners, helping them build great products and great businesses on our platform, and we believe this deal will increase our partner value proposition over time. The established rhythms and ways of working between Terry and his team and the incoming Nokia team will serve us well to ensure that we do not disrupt our building momentum.

6. We are planning to integrate all global marketing under Tami Reller and Mark Penn. It is very important that we pursue a unified brand and advertising strategy as soon as possible.

7. Finance, Legal, HR, Communications, DX / Evangelism, Customer Care and Business Development will integrate functionally at Microsoft. Sourcing, customer logistics and supply chain will be part of Stephen’s Devices organization. ICM / IT will also integrate functionally for traditional IT roles. We will need to work through the implications for factory systems given the differing manufacturing processes and systems at both Nokia and Microsoft.

8. We plan to pursue a single set of supporting services for our devices, and we will figure out how to combine the great Nokia efforts into our Microsoft services as we go through the integration process.

9. There are no significant plans to shift where work is done in the world as we integrate, so we expect the Nokia teams to stay largely in place, geographically.

10. Tom Gibbons will lead the integration work for Microsoft.

While today’s announcement is big news, we have to stay heavily focused on running the current business. We have a huge fall and holiday season ahead of us, so we need to execute flawlessly and continue to drive our business forward. I have no doubt we will.

Steve

This news is of relevance to gamers as Microsoft has made an effort to unite its smartphone, PC and console gaming ecosystems, through Xbox Live profiles and second screen initiative SmartGlass, but as Nokia and Windows Phone are both quite low-profile mobile brands it’s hard to get excited.

However, the addition of such a substantial, experienced division can only assist Microsoft’s efforts to carve out a mobile space of its own against competitors Android, Blackberry and iOS. The patents it has acquired as part of the deal may have far-reaching consequences, as the device sector is notoriously quick to litigate on patent infringement.

The remainder of Nokia will continue operations as an independent company, focusing on Nokia’s plan is to focus on network infrastructure, maps and location based services, and licensing and development.

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41 Comments

  1. battletrax

    Meanwhile there are children in the world who are too poor to buy drinking water. Or they don’t have access to water.

    Id imagine with 7 billion you could end world hunger, and provide wells for people.

    Nice move Micro$oft

    #1 1 year ago
  2. Tr0n

    You forget how much resources and money Bill Gates alone has given away to various charitable causes. You can’t expect the business world to just start giving money away and jeopardize everything they have worked for and built. Let’s also not forget that all of these businesses are ran by people who also have families with children, mortgages and bills to pay.

    Either way, I would really love if people would stop posting things like these every time there’s a large sum of money mentioned.

    #2 1 year ago
  3. Llewelyn_MT

    @1: $7bn is a drop in a bucket. Also, if you want to bash the consumerism have enough decency to use Apple as an example. Thank you.

    #3 1 year ago
  4. Christopher Jack

    Anyone surprised by this? & I mean at all? Even just the slightest bit? No? Ok then, move along, nothing to see here.

    #4 1 year ago
  5. G1GAHURTZ

    @1:

    http://www.gatesfoundation.org/

    ____________________________________________

    I bought a Lumia 620 a few months ago, and didn’t use it due to travelling around a lot.

    I finally got a sim cut down to use in it a few days ago, and the stupid thing can’t even get a signal.

    An internet search told e that it’s a relatively common problem across the Lumia range, so I’m not touching Nokia, or anything related to it, for a good long while…

    #5 1 year ago
  6. alterecho

    Nokia’s board needs to approve this. There’s still some hope. Please don’t let yourself be bought Nokia. I really HATE MS now.

    #6 1 year ago
  7. battletrax

    @2
    @5

    Your absolutely right. I forgot about Bill Gates and his charities.

    I retract my previous statement.

    Now apple on the other hand, thats a different story.

    #7 1 year ago
  8. Christopher Jack

    @8… What?

    #8 1 year ago
  9. Belmont

    So, this will help selling more WP devices ? Microsoft will sell a lot of hardware, Just like it did with Surface !

    #9 1 year ago
  10. Christopher Jack

    @10, Didn’t help Google any. Then again that was really only for their patent portfolio to protect Google’s other partners from Apple’s ridiculous law suits. I’ve yet to see Google take charge of the company.

    #10 1 year ago
  11. xFidelCashflow

    I think the only shocking aspect of this is that Nokia is worth $7.2 Billion

    Microsoft blowing millions or billions on something is just a daily routine now

    #11 1 year ago
  12. Unknown_Gamer

    @8 Ahhh The amount of ignorance in this comment , Putting the money Sign on Sony who lose a lot of money lately while justifying M$ who has one of the most richest men on the world $$$$ .

    Iranians , What can i say lol ?

    #12 1 year ago
  13. alterecho

    @12 No. The shocking fact is that a company such as Microsoft is buying Nokia. A real shame that Nokia, a company with such cutting edge tech, is going under management of ‘Microsoft’.

    #13 1 year ago
  14. GrimRita

    And I thought Real Madrid paid stupid money for Bale….in other news Microsoft buy up a rival for stupid money

    #14 1 year ago
  15. Lloytron

    Well, woke up this morning to find I now work for Microsoft!

    #15 1 year ago
  16. johngeoffrey

    They didn’t buy the patents but hold a 10 year licence on them now. Which means Nokia keep maps, patents, and networking tech. Microsoft do get the devices division though which will be a good thing, in 2/3 years http://press.nokia.com/2013/09/03/nokia-to-sell-devices-services-business-to-microsoft-in-eur-5-44-billion-all-cash-transaction/

    #16 1 year ago
  17. Talkar

    It is important to note that noone has bought anyone yet.
    The deal still has to be approved, which it most likely will however..

    Also, Nokia itself isn’t getting bought, which seems like several commenters here seems to suggest. Nokia makes the vast majority of its income in networking technology, where they really do deliver top notch stuff.

    #17 1 year ago
  18. alterecho

    @17 you must be feeling terrible.

    #18 1 year ago
  19. monkeygourmet

    @17

    Make sure you ask for a free Xbox One! :

    http://www.vg247.com/2013/08/26/white-coloured-variant-of-xbox-one-revealed/

    :)

    #19 1 year ago
  20. DrDamn

    Interesting and odd acquisition. Kind of makes sense but also doesn’t. *If* WP8 is going to be a success then this probably needed to happen, but I still don’t think it will be enough. If Nokia couldn’t make it successful I don’t see what MS is going to bring which will change the fortunes.

    #20 1 year ago
  21. Lloytron

    @20 not particularly! Change can be exciting. Lets see :D

    @21, note the disclaimer on the graphic! Have to be working there as of the 12th July 2013 to be eligible. Bah!

    #21 1 year ago
  22. monkeygourmet

    @23

    Shame! Would have been a nice perk! :)

    #22 1 year ago
  23. Dragon246

    Makes me go “Elop finally succeeded”.
    I fail to see how ditching Symbian in favour of being a platform exclusive (WP) helped Nokia.
    It all started when Elop came in from MS, and now he goes back there.

    So the giant falls. A bit sad, how the once mighty have fallen.

    #23 1 year ago
  24. Units

    @battletrax Microsoft give more money to charity than Sony and Nintendo so shut your pie hole

    #24 1 year ago
  25. alterecho

    @23 I’ve been a Nokia loyalist and i feel terrible and betrayed by this news. Also, MS has a knack of ruining things and is incompetent.

    #25 1 year ago
  26. Lloytron

    @27 I for one welcome the new MS overlords :D

    #26 1 year ago
  27. Erthazus

    Buying Nokia for 7 billion? What’s the point really?

    #27 1 year ago
  28. Christopher Jack

    @29, Shits & giggles.

    #28 1 year ago
  29. Erthazus

    Microsoft should buy all third parties then. Lol and they won next gen and next next gen and every gen out there.

    they have money. A lot of money. LOT’S OF THEM.

    they bought skype, now Nokia… Jesus.

    Imagine, Battlefield, CoD, Assassins Creed, WoW exclusive to one console. Haha :D

    #29 1 year ago
  30. Christopher Jack

    @31, Would barely affect Nintendo.

    #30 1 year ago
  31. Erthazus

    @31m Actually quite opposite. Look at crappy third party support for Nintendo and no one is buying that console and look at the 3DS that has decent third party support. That thing sells like hot cakes right now. Imagine that there will be no more CoD and stuff on Nintendo.

    then Nintendo goes third party and MS buys it :D :D :D L O L that is a retarded joke but it’s funny if that would happen.

    third party is critical for console survival.

    #31 1 year ago
  32. Christopher Jack

    @33, What I’m saying is that they could get away without third party support. Just up the Mario games & woolah, record breaking console sales.

    #32 1 year ago
  33. Erthazus

    WiiU has Mario’s and nothing happens really.

    they will soon have Windwaker and no one gives a F.

    remember Gamecube? FAILURE and it had it’s own Zelda, (!) SMASH BROS (!), Mario, even pokemon title and remember Sony with third party? Oh yeah. that console sold like gajjillion copies. The same failure as WiiU.

    #33 1 year ago
  34. Christopher Jack

    The GameCube was also their very first serious attempt at pandering to third party devs.

    #34 1 year ago
  35. Erthazus

    WiiU was too. Remember first E3 conference with WiiU presentation? They had Ricitello on stage. The CEO of EA.
    So yeah. Third party is the most critical thing ever.

    and it was not really the first very serious attempt because if you remember NES. They had almost every publisher and it sold gajillions too for it’s generation obviously.

    #35 1 year ago
  36. Kingpin

    @battletrax

    Bill Gates has donated $36 billion in his lifetime, more than half of his estimated new worth.

    I am pretty sure that 7 bill $ won’t do stop the hunger.

    #36 1 year ago
  37. deadflowers

    I do own Lumia 720, and yes, it’s a rather beautiful and solid phone.

    #37 1 year ago
  38. silkvg247

    Didn’t know Nokia were such pedophiles!

    #38 1 year ago
  39. Cobra951

    @35: The Gamecube was a failure? That’s news to me. Quite a few essential games on that system, all Nintendo’s. It had *two* prime Zeldas, not to mention two Metroid Primes. Twilight Princess is a GC game, not a Wii game. Definitely best played un-mirrored and un-waggled on the GC.

    But how did Nintendo filter into this topic?

    #39 1 year ago
  40. DSB

    Nokia (and especially Nokia shareholders) were pretty upset about the lack of support for Windows Phone leading up to the Windows 8 launch.

    … I guess that made the company so much cheaper to buy for Microsoft.

    Imagine that.

    Given their track record on devices, this just feels pretty doomed.

    #40 1 year ago
  41. super3001

    they should make nokias that run android if they want make money

    great handsets but windows phone os are steaming shits

    #41 1 year ago

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