Nokia and Microsoft finally tie the knot with some mighty farewell gift from Steve Ballmer, allowing Microsoft a formal lead platform for Windows Phone devices and its future mobile strategy. It also puts Stephen Elop in a strong position for the CEO role at Microsoft.
Finally, The Big Deal
While nothing like the scale of Verizon/Vodafone's $130 billion network deal, the (all-but) final consumption of Nokia by Microsoft will have greater ramifications for consumers, and the mobile ecosystem. Ultimately, it finally gives Microsoft a semi-level footing to battle the likes of Apple, Google, Samsung and others, with its own class of devices.
The formal details are that Microsoft and Nokia boards have agreed to Microsoft's purchase of substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and use Nokia’s mapping services. The deal is expected to close in 1Q14, subject to the usual approvals. With a Nokia Surface tablet likely to be unveiled this week, the timing is pretty sweet, creating some stir just ahead of Apple's next big launch with the new iPhones.
Given that Microsoft recently granted a seat on its board to an investor that wants the company to sell off its Xbox gaming division, it is possible that approval won't be as straightforward as imagined. However, the focus and core of the deal seems solid, building on the original 2011 partnership that saw Nokia focus on the Windows Phone platform. It is also a positive final note for Steve Ballmer to retire on when the company finds a replacement.
Nokia's Big Future?
While no one can claim that the first years of the deal have been a massive victory, Nokia devices have been gaining share faster in recent quarters, overtaking BlackBerry. With the full power of Microsoft behind the brand, it should help accelerate growth and secure Nokia's financial position. The term "unified branding and marketing" used in the release could mean anything but expect Nokia's name to stick around for some time to come. Nokia's share price was up 45% on European market opening.
The deal will see some 32,000 workers move to Microsoft, with the key asset being Nokia’s Smart Devices business unit, including the Lumia brand and products. It also gets Nokia's long-term patent licensing agreement with Qualcomm, essential for playing in the mobile arena, as well as other licensing agreements.
To get the ball rolling, Microsoft is using some of its hot-topic $70 billion in overseas funds (an indication of how Apple may end up using some of its massive overseas hoard) to give Nokia nearly $2 billion in financing. Microsoft will also build a new European data center in Finland , investing $250 million in the process.
From the Nokia board, CEO Stephen Elop, and key others would transfer to Microsoft, with Elop becoming Executive Vice President of Devices and Services, and a new candidate to replace Ballmer, having been a former Microsoft exec before joining Nokia. There's a press conference at Nokia's HQ today and a shareholder meeting in November to finalise the deal.