Microsoft to acquire Nokia’s Devices & Services for $7.17 billion

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It has been rumored again and again since Microsoft and Nokia first partnered together to make Windows Phone devices, and now it has officially happened. Microsoft has agreed to purchase Nokia’s Devices & Services unit, as well as license Nokia’s patents in a deal that will be worth €5.44 billion (~$7.17 billion). Microsoft CEO Steve Ballmer called the move “a bold step into the future” for the company, and pointed to the Lumia 1020 as an example of what the companies have done together.

According to the terms of deal, Microsoft will pay €3.79 billion (~$5 billion) to purchase “substantially all of Nokia’s Devices & Services business”, and will pay an additional €1.65 billion (~$2.17 billion) to license Nokia’s patents, for a total cost of €5.44 billion (~$7.2 billion) in cash. Microsoft says it “will draw upon its overseas cash resources to fund the transaction”; and, that it expects the deal to close by Q1 of 2014, pending approval by the Nokia board and any potential regulatory investigations.

As part of the purchase, approximately 32,000 people are expected to transfer from Nokia to Microsoft, including 4,700 people in Finland and 18,300 employees “directly involved in manufacturing”. As far as the top brass, Nokia CEO Stephen Elop; Executive Vice President, Smart Devices Jo Harlow; Executive Vice President, Operations Juha Putkiranta; Executive Vice President, Mobile Phones Timo Toikkanen; and, Executive Vice President, Sales and Marketing Chris Weber are all going to be moving to Microsoft.

Steve Ballmer laid out these plans for integrating the top brass into Microsoft: Stephen Elop will lead Microsoft’s Devices team, which will be expanded to include all of the employees coming over from Nokia. Current head of the Devices and Studios team, Julie Larson-Green, will continue as the leader of the team, but it seems she will focus on Xbox and Surface devices.

Oddly, Ballmer says the plan is for Julie to join Elop’s team, which makes it sound like Ms. Larson-Green just got bumped from being the head of the group. Another strange thing is that Ballmer makes it sound like the Surface team will be staying under the lead of Ms. Larson-Green, which would mean it is staying separate from the incoming Nokia design and engineering teams. The other top acquires will continue in their current positions: Jo Harlow will continue to lead the Smart Devices team, Timo Toikkanen will lead the Mobile Phones team, Stefan Pannenbecker will lead the Design team, and Juha Putkiranta will lead the integration effort on Nokia’s end.

Microsoft will be acquiring all of the business and design teams behind the Lumia devices; and, of course, Microsoft will also be acquiring the Lumia brand name, as well as the Asha brand name, which has a lot of cache in the low-end market. The plan is to integrate global marketing quickly, because Ballmer wants to have a “unified brand and advertising strategy as soon as possible”, which would seem to mean that pretty soon you’ll be seeing Microsoft Lumia 1020 on store shelves.

Microsoft will also be signed-on to Nokia’s current long-term patent licensing agreements with Qualcomm and others. The terms of the patent licensing deal will give Microsoft “a 10-year non-exclusive license” to Nokia patents, and Nokia will get access to Microsoft patents for use in HERE products. HERE products look to be one of the three tent-poles of Nokia’s business going forwards, along with the Nokia Siemens Networks, and Advanced Technologies, which is Nokia’s licensing and development arm.

Nokia will host a press conference later today, Tuesday, Sept. 3 at the Dipoli conference center in Espoo, Finland.

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