Microsoft Buys Nokia Mobile Business in $7 Billion Deal Microsoft Corp. struck a $7 billion deal to acquire Nokia Corp.’s struggling cellphone business, a bold move to try to catch up in a fast-growing mobile market that is now dominated by Samsung Electronics Co. and Apple Inc. The deal comes on the heels of Microsoft’s announcement that Chief Executive Steve Ballmer will retire as soon as a successor is found. As part of the deal for Nokia’s devices-and-services business, Microsoft will bring aboard 32,000 Nokia employees including CEO Stephen Elop, who is believed to be among the contenders for Mr. Ballmer’s job. The companies said late Monday that Microsoft will pay €3.79 billion to buy “substantially all” of the Nokia business, which includes its smartphone operations. The Redmond, Wash., company will also pay €1.65 billion to license Nokia’s patents, the companies said, bringing the deal to €5.44 billion, or $7.18 billion. Nokia was already Microsoft’s closest partner in smartphones, with the ailing Finnish company one of the biggest supporters of Microsoft’s phone software. The deal with Nokia is an apparent acknowledgment that Microsoft needs a stronger hand to play in the mobile-phone business, where it is playing catch-up to Apple and Google Inc. Microsoft’s lagging position in mobile is one of the most serious threats Mr. Ballmer’s successor will need to tackle. For Nokia, the onetime leader of the mobile-phone business, the deal is a capitulation to the harsh realities of its deteriorating position—a sign that management concluded it is unable to take on rivals like Apple and Samsung on its own. Mr. Elop has been hacking costs out of Nokia in the three years since the Finnish company agreed to tether itself exclusively to Microsoft’s Windows Phone smartphone system. But while Mr. Elop has promised that Nokia’s operating expenditures for its phone business will be cut to half the 2010 levels by the end of this year, analysts say Nokia’s phone sales have fallen even faster. Nokia said the deal with Microsoft will improve its financial position and “provide a solid basis for future investment in its continuing businesses.” Microsoft, meanwhile, said it expects the deal to accelerate the growth of its market share and profit in mobile devices. This deal “builds on the phenomenal partnership we’ve built with Nokia,” Mr. Ballmer said during a joint interview with Nokia Chairman Risto Siilasmaa. He said that because Nokia and Microsoft already work so closely together, it should be a “smooth transition” to integrate Nokia’s mobile business into Microsoft. The workers being added from Nokia will pad Microsoft’s employee count by about one-third. “This is definitely major news for Nokia, Nokia employees and Finland,” Mr. Siilasmaa added. The Wall Street Journal reported in June that Microsoft and Nokia had discussed a sale of Nokia’s mobile-phone business but the talks fell apart over the price of the transaction. Deal negotiations were sparked by a phone call from Mr. Ballmer to Mr. Siilasmaa just before a February mobile- industry conference in Barcelona. Mr. Ballmer sought to see whether Microsoft could be more than just a partner to Nokia, Messrs. Ballmer and Siilasmaa said in the telephone interview. The Nokia board met more than 50 times to discuss the possibility of a deal with Microsoft, Mr. Siilasmaa said. As for his part in the deal, Mr. Ballmer said: “This has been a high priority for me.” Mr. Ballmer didn’t say whether the Nokia deal timing and the announcement of his retirement just over a week ago was a coincidence. The Microsoft CEO did say he called two people, Messrs. Siilasmaa and Elop, just before his retirement was made public, as the two companies were in the final stage of acquisition talks. The companies said Microsoft is expected to use its stockpile of overseas cash to pay for the Nokia purchase and licensing pact. Microsoft and Nokia said the transaction is expected to close in the first three months of 2014, subject to approval by Nokia shareholders and other conditions.
Posted on: Tue, 03 Sep 2013 18:09:10 +0000
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