Microsoft announced that they have reached an agreement with Nokia’s board to acquire Nokia’s devices & services business and to license Nokia’s patents and mapping services. Read on for details.
Microsoft announced that they have reached an agreement with Nokia’s board to acquire Nokia’s devices & services business and to license Nokia’s patents and mapping services. Microsoft will pay about $5 billion for Nokia’s Devices and Services business, and about $2 billion to license certain patent holdings from Nokia. The total transaction will be around $7 billion; in addition, Microsoft will provide loans up to about Euro 1.5 million to Nokia in the meantime. Stephen Elop has stepped down as Nokia CEO to become the head of the Devices and Services division, and will take over Microsoft’s current devices business when the transaction closes in early 2014. Microsoft will own the Lumia and Asha lines and will be able to use the Nokia brand for some time following the transaction. The deal is subject to regulatory approval, but the parties expect relatively easy approvals as the combination should enhance competition in the smartphone business. On a US GAAP basis, this deal is expected to be accretive to Microsoft’s EPS in 2016, 2015 on the adjusted non-GAAP method of presentation. Here is the full press release from Microsoft:
Microsoft to acquire Nokia’s devices & services business, license Nokia’s patents and mapping services
Sept. 03, 2013
REDMOND, Washington and ESPOO, Finland – Sept. 3, 2013 – Microsoft Corporation and Nokia Corporation today announced that the Boards of Directors for both companies have decided to enter into a transaction whereby 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.
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. 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.
“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services,” said Steve Ballmer, Microsoft chief executive officer. “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.”
“We are excited and honored to be bringing Nokia’s incredible people, technologies and assets into our Microsoft family. Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we anticipate a smooth transition and great execution,” Ballmer said. “With ongoing share growth and the synergies across marketing, branding and advertising, we expect this acquisition to be accretive to our adjusted earnings per share starting in FY15, and we see significant long-term revenue and profit opportunities for our shareholders.”
“For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter,” said Risto Siilasmaa, Chairman of the Nokia Board of Directors and, following today’s announcement, Nokia Interim CEO. “After a thorough assessment of how to maximize shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders. Additionally, the deal offers future opportunities for many Nokia employees as part of a company with the strategy, financial resources and determination to succeed in the mobile space.”
“Building on our successful partnership, we can now bring together the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing and manufacturing,” said Stephen Elop, who following today’s announcement is stepping aside as Nokia President and CEO to become Nokia Executive Vice President of Devices & Services. “With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.”
Nokia has outlined its expected focus upon the closing of the transaction in a separate press release published today.
