Following Apple’s revolutionary disruption of the smartphone industry, i’ve since followed Nokia on its free-fall trajectory both on a local market where its faced stiff competition from legitimate feature phone vendors and counterfeit ones and a global scene. With the buy-out, Microsoft thinks it can save money and grow its platform faster by bringing its top hardware partner in-house, and it can finance the deal with overseas cash, limiting the deal’s impact on dividend-hungry shareholders. But here’s what’s in for the two Tech giants.
What Microsoft acquired
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. Under the deal, Microsoft will also see the return of its prodigal son: former Microsoft executive turned Nokia CEO Stephen Elop will be rejoining the Microsoft team, along with 32,000 Nokia employees.
What Nokia will keep
Nokia will be keeping its networking, mapping and location businesses and technologies. However, Microsoft will use Nokia’s HERE mapping technology, for which it will still pay annual fees. Redmond sees mapping and geospatial services as core to its strategy going forward, saying that that there needs to be “an effective alternative to Google” and “more than one ‘digital map of the world.’” Nokia will also keep its 56,000 employees while 32,000 will be transferred to Microsoft. Nokia will receive $1.98 Billion in financing from Microsoft. This will be available in 3 EUR 500 million tranches(sections). If Nokia does decide to use it, Nokia would pay back this to Microsoft from the proceeds of the deal upon closing.
What’s in for Microsoft
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.
What’s in for Nokia
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.
Say Goodbye to Nokia as you used to know it
Under the terms of Microsoft’s $7.2 billion acquisition of Nokia’s devices and services division, the “Asha” and “Lumia” trademarks will transfer to Redmond, but the “Nokia” mark will remain property of the Finnish company, and may only be used on feature phones running the basic Series 30 and Series 40 operating systems under a 10-year license agreement. (Nokia itself is barred from using the Nokia brand on any mobile devices at all until December 31st, 2015.) . That means any future Windows Phones built by the newest division of Microsoft will be Microsoft-branded and Not Nokia branded. Goodbye Nokia. We loved you! Image: dealspwn.com Editor’s Note: Most of this content is been sourced from Microsoft and TheVerge.
