Microsoft to acquire Nokia’s devices & services business, license Nokia’s patents and mapping services
REDMOND, Washington and ESPOO, Finland – Sept. 3, 2013 –
Microsoft Corporation and Nokia Corporation today announced that the Boards of
Directors for both companies have decided to enter into a transaction whereby
Microsoft will purchase substantially all of Nokia’s Devices & Services
business, license Nokia’s patents, and license and use Nokia’s mapping
services.
Under the terms of the agreement, Microsoft will pay EUR
3.79 billion to purchase substantially all of Nokia’s Devices & Services
business, and EUR 1.65 billion to license Nokia’s patents, for a total
transaction price of EUR 5.44 billion in cash. Microsoft will draw upon its
overseas cash resources to fund the transaction. 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.
Building on the partnership with Nokia announced in February
2011 and the increasing success of Nokia’s Lumia smartphones, Microsoft aims to
accelerate the growth of its share and profit in mobile devices through faster
innovation, increased synergies, and unified branding and marketing. For Nokia,
this transaction is expected to be significantly accretive to earnings,
strengthen its financial position, and provide a solid basis for future
investment in its continuing businesses.
“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.”
“We are excited and honored to be bringing Nokia’s
incredible people, technologies and assets into our Microsoft family. Given our
long partnership with Nokia and the many key Nokia leaders that are joining
Microsoft, we anticipate a smooth transition and great execution,” Ballmer
said. “With ongoing share growth and the synergies across marketing, branding
and advertising, we expect this acquisition to be accretive to our adjusted
earnings per share starting in FY15, and we see significant long-term revenue
and profit opportunities for our shareholders.”
“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
today’s announcement, Nokia Interim CEO. “After a thorough assessment of how to
maximize shareholder value, including consideration of a variety of
alternatives, we believe this transaction is the best path forward for Nokia
and its shareholders. Additionally, the deal offers future opportunities for
many Nokia employees as part of a company with the strategy, financial
resources and determination to succeed in the mobile space.”
“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. “With this combination of talented people,
we have the opportunity to accelerate the current momentum and cutting-edge
innovation of both our smart devices and mobile phone products.”
Nokia has outlined its expected focus upon the closing of
the transaction in a separate press release published today.
TERMS OF THE
AGREEMENT
Under the terms of the agreement, Microsoft will acquire
substantially all of Nokia’s Devices and Services business, including the
Mobile Phones and Smart Devices business units as well as an industry-leading
design team, operations including all Nokia Devices & Services-related
production facilities, Devices & Services-related sales and marketing
activities, and related support functions. At closing, approximately 32,000
people are expected to transfer to Microsoft, including 4,700 people in Finland
and 18,300 employees directly involved in manufacturing, assembly and packaging
of products worldwide. The operations that are planned to be transferred to
Microsoft generated an estimated EUR 14.9 billion, or almost 50 percent of
Nokia’s net sales for the full year 2012.
Microsoft is acquiring Nokia’s Smart Devices business unit,
including the Lumia brand and products. Lumia handsets have won numerous awards
and have grown in sales in each of the last three quarters, with sales reaching
7.4 million units in the second quarter of 2013.
As part of the transaction, Nokia is assigning to Microsoft
its long-term patent licensing agreement with Qualcomm, as well as other
licensing agreements.
Microsoft is also acquiring Nokia’s Mobile Phones business
unit, which serves hundreds of millions of customers worldwide, and had sales
of 53.7 million units in the second quarter of 2013. Microsoft will acquire the
Asha brand and will license the Nokia brand for use with current Nokia mobile
phone products. Nokia will continue to own and manage the Nokia brand. This
element provides Microsoft with the opportunity to extend its service offerings
to a far wider group around the world while allowing Nokia’s mobile phones to
serve as an on-ramp to Windows Phone.
Nokia will retain its patent portfolio and will grant
Microsoft a 10-year license to its patents at the time of the closing. Microsoft
will grant Nokia reciprocal rights to use Microsoft patents in its HERE
services. In addition, Nokia will grant Microsoft an option to extend this
mutual patent agreement in perpetuity.
In addition, Microsoft will become a strategic licensee of
the HERE platform, and will separately pay Nokia for a four-year license.
Microsoft will also immediately make available to Nokia EUR
1.5 billion of financing in the form of three EUR 500 million tranches of
convertible notes that Microsoft would fund from overseas resources. If Nokia
decides to draw down on this financing option, Nokia would pay back these notes
to Microsoft from the proceeds of the deal upon closing. The financing is not
conditional on the transaction closing.
Microsoft also announced that it has selected Finland as the
home for a new data center that will serve Microsoft consumers in Europe. The
company said it would invest more than a quarter-billion dollars in capital and
operation of the new data center over the next few years, with the potential
for further expansion over time.
Source: Microsoft
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