Microsoft purchases Nokia’s phone business

Microsoft purchases Nokia’s phone business

American software giant Microsoft has bought Nokia’s phone business, including its patents, for 5.44 billion euro (7.2 billion dollars). Finnish company Nokia produced its first cell phone some thirty years ago and dominated the market between 1998 and 2012, but having missed the smartphone trend completely, it has to sit idly by as Apple and Samsung cut up that lucrative market amongst themselves.

Steve Ballmer’s last trick

It is not exactly surprising that Microsoft purchased Nokia’s phone business, as both companies have been collaborating since 2011 when Nokia replaced its proprietary operating system with Windows.

Microsoft, having dominated the software market for 40 years, has also missed the digital media revolution of the past decade. Apple flew by and its own answers to the iPod, iPhone and iPad failed miserably. CEO Steve Ballmer, successor to the legendary Bill Gates, announced a large restructuring in July, reorganizing the company on two pillars: devices and (internet) services, in order to launch products quicker. Microsoft also wants to be able to launch a software platform more quickly, in order to compete with Apple (and its iOS) and Samsung (with Android).

The acquisition of Nokia’s phone business and its patents fits perfectly into that strategy and is considered to be Steve Ballmer’s last trick, as he had announced his retirement at the end of August.

Exit CEO Stephen Elop

The sale coincides with the end of Stephen Elop’s reign as Nokia CEO. The Canadian moved from Microsoft to Nokia in 2010 and immediately hit the nail on the head in a leaked memo, causing a lot of controversy: “The first iPhone shipped in 2007, and we still don't have a product that is close to their experience.[...]Unbelievable.” Interesting detail is that Stephen Elop is one of the possible successors of Steve Ballmer at Microsoft. His temporary replacement at Nokia is current chairman Risto Siilasmaa.

Nokia’s phone activities still generate a turnover of 14.9 billion euro (19.6 billion dollars), representing nearly half of Nokia’s net sales of 2012. The deal with Microsoft should be taken care of in the first quarter of 2014, after share holders and antitrust authorities have green-lit the deal.

"Change and reinvention for Nokia"

Nokia will now refocus on three central activitites: networking devices and services (through NSN), navigation and maps (through HERE) and the development of new technologies and licences (through Advanced Technologies). For that purpose, Nokia bought Siemens’ 50 % stake in their joint venture in August. Nokia now fully owns Nokia Siemens Networks, specializing in broad band networks.

"Today is an important moment of change and reinvention for Nokia and its employees", Nokia stated in its official announcement, a repetition of history for the Finnish company. Up until the nineties, Nokia was a conglomerate doing all kind of things, from paper production, to tyres, television and mobile phones. The 148-year-old company then decided to cut off all activities to solely focus on the production of cell phones.

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