Microsoft buys Nokia’s handset business for £4.6bn

Microsoft has taken what is has described as a “bold” move of purchasing Nokia’s handset business in a deal worth €5.44bn (£4.6bn) that puts the company head to head with Apple and Google in the mobile hardware and software market.

Nokia Microsoft
Nokia CEO Stephen Elop and Microsoft CEO Steve Baller in 2011 when the two companies’ strategic partnership was first announced.

Read Mark Ritson’s view on the acquisition here 

The deal will see Microsoft purchasing Nokia’s services and devices business, which includes the Finnish company’s smartphone and feature phone business; its marketing, operations, sales and design teams; and its manufacturing and assembly facilities. Microsoft will license some of Nokia’s patents for use across all Microsoft products, including the ability to use its Nokia HERE mapping system – although this will continue to be owned by Nokia.

Microsoft is also acquiring the “Lumia” and “Asha” brand names that Nokia has used for its most recent smartphone and feature phone ranges respectively. It has licensed the use of the Nokia brand on current products and on feature phones under a 10-year agreement, although Nokia will retain ownership of the brand, which has led to early speculation the Nokia brand will disappear from future smartphone devices.

The acquisition comes just days after Microsoft chief executive Steve Ballmer announced he would retire in the next 12 months. Nokia CEO Stephen Elop, who now rejoins the company he left in 2010, has been widely tipped as the successor for the top role at Microsoft. Elop will become executive vice president of Microsoft’s devices and services unit.

Some 32,000 Nokia staff will join Microsoft in total. The deal is expected to close in the first quarter of 2014, subject to approval by Nokia shareholders and regulators.

All global marketing will now be integrated under Microsoft’s most senior marketer Tami Reller, the former Windows CMO, and Mark Penn, Microsoft’s executive vice president of advertising and strategy.

Chris Weber, Nokia executive vice president of sales and marketing, will follow Elop to Microsoft.

It is not yet clear what will happen to Nokia’s wider marketing team, including how Nokia’s chief marketing officer Tuula Rytilä will be transitioned into the new business.

In an open letter to employees Steve Ballmer says: “It is very important we pursue a unified brand and advertising strategy as soon as possible.”

In a statement Ballmer says: “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.”

It is hoped the deal will accelerate Microsoft’s share and profits in mobile across its family of devices and services under one unified brand. Microsoft has long been described as being slow to seize the mobile opportunity as consumer demand for traditional PCs and laptops has waned in recent years.

Nokia and Microsoft formed a “strategic partnership” in 2011 that saw all Nokia smartphones run on the Windows Phone software. Windows Phone had a 3.3 per cent share of the global smartphone operating system market in the second quarter of 2013, according to Gartner, but Apple’s iOS and Google’s Android software make up more than 90 per cent of the market.

Nokia had a 14 per cent share of total mobile phone sales in the period, behind only Samsung (24.7 per cent), according to Gartner – but that also accounts for sales of feature phones which have considerably lower profit margins than smartphones, a market where it does not even sit in the top five manufactures globally.

The Nokia business has now been reduced to its networks, navigation and its patent portfolio and will be led by interim chief executive and chairman Risto Siilasmaa.

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