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Microsoft to buy Nokia's cell phone business for $7.2B, will license patents and services

post #1 of 109
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In a pair of statements released early Tuesday, Microsoft and Nokia announced that the two companies have entered into a mutual agreement in which the Windows Phone maker will purchase the Finnish firm's Device and Services Business, as well as license patents and mapping assets, for $7.17 billion.

Microsoft Buys Nokia
Slide from Microsoft's presentation regarding the Nokia purchase. | Source: Microsoft


When the deal closes sometime in the first quarter of 2014, Microsoft is set to pay nearly $5 billion to substantially own Nokia's Device and Services business, while certain patents will be licensed for an additional $2.2 billion. According to the announcement, licensing will include Nokia's HERE mapping service.

Nokia's current CEO, Stephen Elop, is also expected to step down as part of the deal. Instead, he will be Microsoft's ?Nokia Executive Vice President of Devices & Services.? There is also talk that Elop is in the running to replace Microsoft's outgoing chief executive Steve Ballmer, though no official statements were offered on that front.

?It?s a bold step into the future ? a win-win for employees, shareholders and consumers of both companies," Ballmer said of the arrangement. "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. 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.?

The 10 year licensing agreement will allow Microsoft to use the Nokia moniker on current cellular devices and give the Redmond, Wash., company a substantial boost as it tries to keep the Windows Phone platform relevant in the face of dominant smartphone players Apple and Google. Specifically, Microsoft is acquiring over 8,500 design patents, 30,000 utility and patents pending, the Lumia and Asha brands and a 10-year license to use the Nokia brand on feature phones.

Microsoft's acquisition is somewhat reminiscent of Google's $12.5 billion purchase of Motorola in 2012. However, unlike the huge smartphone marketshare enjoyed by Google's Android, Microsoft's Windows Phone is a minor player in the segment.

Market research firm Kantar on Monday estimated Microsoft's Windows Phone owned a mere 3.5 percent of the U.S. smartphone market during the July quarter, while Apple's iOS and Google's Android held a respective 43.4 percent and 51.1 percent share over the same period.

Potential price adjustments protecting both companies if the deal falls through, with Microsoft specifically subject to a $750 million termination fee if the proper regulatory clearances are not received.
post #2 of 109

Basically expected. They all but owned it already. Now for them to flush it down the toilet like HP did Palm.

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post #3 of 109

Microsoft is now going to have a huge arsenal of Patents. Wonder how the landscape will change from here on.

post #4 of 109
Quote:
Originally Posted by Tallest Skil View Post

Basically expected. They all but owned it already. Now for them to flush it down the toilet like HP did Palm.

If Ballmer was going to leading this long term that is exactly what would happen.

But maybe the next CEO will be more competent?

Who knows but as of now this will be another write off for Microsoft.
post #5 of 109
So basically Elop was a Trojan horse and he's now back at Microsoft, most likely to replace Ballmer.
post #6 of 109
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Originally Posted by simtub View Post

Microsoft is now going to have a huge arsenal of Patents. Wonder how the landscape will change from here on.

I believe there are already licensing deals in place for all of those patents so nothing is really going to change for the greater landscape.

But maybe Microsoft will bolster Bing with Navteq maps now. A better mapping client would bring Bing closer to competing with Google.
post #7 of 109
"The 10 year licensing agreement will allow Microsoft to use the Nokia moniker on current mobile devices and give the Redmond, Wash., company a substantial boost as it tries to keep pace with smartphone giants Apple and Google."

Pick your time horizon - three or five years or more - Microsoft/Nokia is likely to remain mired as a smartphone also-ran to iOS and Android devices.

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post #8 of 109
Quote:
Originally Posted by simtub View Post

Microsoft is now going to have a huge arsenal of Patents. Wonder how the landscape will change from here on.

 

No, they won't. The deal gives them free use of the patents for 10 years, but Nokia remains the owner. Won't change the landscape at all.

 

===

 

Elop really played the Trojan Horse part well. $5bn (far less than what MS paid for Skype) for a company that was $110bn a few years ago. There is little a MS manager can't wreck. Nokia share holders will be miffed. The remaining parts are either burning money (HERE) or in a predicted decline (NSN). Elop made them buy the remaining 50% of NSN (spending their remaining cash for a doubtful business) and now sells "devices and services" for next to nothing.

 

And as they can use their foreign funds, MS even saves the 30% tax they would have to pay when repatriating the money... If it would not stink that much, I would have to admire it.

post #9 of 109

Sounds good to me. The latest Lumia is a great phone. If I didn't want to re-buy all the apps I've purchased for iOS, I'd strongly look at switching instead of picking up a 5S next week. The camera alone is like night and day compared to everything else out on the market right now.

Fanboys can poo poo all they want, but strong competition is a great thing for consumers, so I hope good things come of this.

post #10 of 109
I see this as a pretty smart move by Microsoft. They get Nokia's handset business and Elop likely takes over as CEO when Ballmer leaves. Microsoft's biggest challenge is overcoming Samsung and Apple's huge marketshare. Guess they feel the only way to compete is ownership of the entire stack. Interesting...
post #11 of 109

Funny. Microsoft of the 1990s would have been telling everyone that licensing the OS is where the money is at. They even had Apple convinced that it should license Mac OS and Newton OS. Now, everyone wants to be a "vertically integrated device and services" company. Oh Microsoft. Whatever happened to your business model?

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post #12 of 109

Since Apple and Microsoft have a patent agreement, then Apple can use Nokia technology patents, right?

post #13 of 109
Quote:
Originally Posted by Rogifan View Post

So basically Elop was a Trojan horse and he's now back at Microsoft, most likely to replace Ballmer.

 

I would not be surprised if that was part of the deal. It's Elop's reward for giving Microsoft the only real feather in its mobile OS hat.

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post #14 of 109
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Originally Posted by drblank View Post

Since Apple and Microsoft have a patent agreement, then Apple can use Nokia technology patents, right?

 

Would think so.

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post #15 of 109
After Apple's smart phone success story Google buys failed Motorola and now Microsoft follows suit with another failed phone maker.  Smells like success is just around the corner!  
 
Now which way are those deck chairs suppose to face?  
post #16 of 109
Quote:
Originally Posted by drblank View Post

Since Apple and Microsoft have a patent agreement, then Apple can use Nokia technology patents, right?

 

Apple does have a license agreement with Nokia and pays for Nokia's patents. MS did not buy Nokia's patents, they only bought a ten-year license for all of them. You normally can't "resell" patents.

post #17 of 109

I hope this doesn't preclude Apple from getting a hold of or licensing Nokia's map tech. I believe Nokia has something similar to street view, but in 3D mapping form similar to Flyover, which would be very interesting to see integrated into Apple Maps. Also, as someone else pointed out, it's pretty funny to see everyone spending the big bucks to follow in Apple's (vertically integrated) footsteps.

   

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post #18 of 109
Hardly the same. Very smart move by Microsoft. Motorola is not Nokia.

Philip
post #19 of 109
Quote:
Originally Posted by PatchyThePirate View Post

I hope this doesn't preclude Apple from getting a hold of or licensing Nokia's map tech.

 

Why would it? With MS buying devices & services from Nokia, all that is left of Nokia is NSN (infrastructure) and HERE (maps). Since Elop will go back to MS, all ties with Nokia (except for the patent licensing) will be capped. HERE is a loss maker and NSN is predicted to decline. Apple will certainly have a chance to pick up the remaining bits and pieces (if they really want them... I am not sure they do). Nokia is done.

post #20 of 109

$7.2 Billion?  Nokia lost $5 Billion last year.   I wonder how long it's going to take to recoup their money...    Ooops.

 

Microsoft seems to like spending billions of dollars buying companies that are on financial skids?   Smooth move Ballmer.

post #21 of 109
Quote:
Originally Posted by dreyfus2 View Post

 

Why would it? With MS buying devices & services from Nokia, all that is left of Nokia is NSN (infrastructure) and HERE (maps). Since Elop will go back to MS, all ties with Nokia (except for the patent licensing) will be capped. HERE is a loss maker and NSN is predicted to decline. Apple will certainly have a chance to pick up the remaining bits and pieces (if they really want them... I am not sure they do). Nokia is done.

 

That makes a lot of sense. It's good to know it's an option. After my post I found this quote from Nokia, that they want to be the

 

"leading independent location cloud platform company, offering mapping and location services across different screens and operating systems."

   

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post #22 of 109
Quote:
Originally Posted by PatchyThePirate View Post

I hope this doesn't preclude Apple from getting a hold of or licensing Nokia's map tech. I believe Nokia has something similar to street view, but in 3D mapping form similar to Flyover, which would be very interesting to see integrated into Apple Maps. Also, as someone else pointed out, it's pretty funny to see everyone spending the big bucks to follow in Apple's (vertically integrated) footsteps.

 

Purchasing a tech company's IP and then cutting off those services to competitors probably wouldn't be in Microsoft's best interests.  I think they'd rather have the extra income more than they'd want to try and screw the competition.

post #23 of 109
Quote:
Originally Posted by pmcd View Post

Hardly the same. Very smart move by Microsoft. Motorola is not Nokia.

Philip

It's the only move they could make. Nokia is about the only phone maker that actually sells Windows phones in any decent quantities.  I'm just wondering how long it's going to take Microsoft to buy Dell and start making their own labeled desktops and laptops to be able to catch up to Apple's Revenue and Profit levels.

 

I think Microsoft's profit margins are going to start eroding since they are becoming more of a hardware company which has much lower profit margins.

post #24 of 109
Quote:
Originally Posted by drblank View Post

$7.2 Billion?  Nokia lost $5 Billion last year.   I wonder how long it's going to take to recoup their money...    Ooops.

 

Microsoft seems to like spending billions of dollars buying companies that are on financial skids?   Smooth move Ballmer.

 

Nokia was not at all in financial trouble before Elop took over. This was a textbook destruction of a viable company. If Nokia would have (and I am not an Android fan at all) bet on Android, then Samsung would be in trouble.

 

Nokia's engineers and distribution network are easily worth $7.2bn, if you have the products to push... Luckily, MS hasn't.

post #25 of 109
Quote:
Originally Posted by PatchyThePirate View Post

 

That makes a lot of sense. It's good to know it's an option. After my post I found this quote from Nokia, that they want to be the

 

"leading independent location cloud platform company, offering mapping and location services across different screens and operating systems."

 

Yeah, they are quite big in car navigation systems, a lot of premium brands use their stuff - but they don't have any profits. Just, Bing has own maps, Google has maps, Apple has maps... Where does that leave them? MS did feature their services as long as they needed them... I expect that to stop rather soon. AND, not to be forgotten, MS's own car services (Ford Sync) are MS-driven, Apple's iOS in the Car has plenty of subscribers already. They have a product, but no longer a platform. I am no genius, but I have a certain idea how that will end.

post #26 of 109
Originally Posted by AppleInsider View Post

... Microsoft's Windows Phone is a minor player in the segment.

 

$7.2 billion is a lot to spend on a mobile segment exit strategy.

But Microsoft had to buy Nokia within 12 months of Ballmer's retirement announcement.

That way, the Microsoft board can blame it on Ballmer and retreat back to Windows + Office on the desktop.

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post #27 of 109

I wonder if there's going to be a shareholder's lawsuit since Nokia actually has quite a bit of cash sitting in short term/ long term investments.  I mean, the market cap is $14 Bil, so Microsoft isn't paying much for the company in those terms, they are getting them dirt cheap actually.

post #28 of 109

Sounds like a great idea to me. Now MS can be in control of the hardware and software (you know, like Apple does).

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post #29 of 109
Quote:
Originally Posted by dreyfus2 View Post

 

Yeah, they are quite big in car navigation systems, a lot of premium brands use their stuff - but they don't have any profits. Just, Bing has own maps, Google has maps, Apple has maps... Where does that leave them? MS did feature their services as long as they needed them... I expect that to stop rather soon. AND, not to be forgotten, MS's own car services (Ford Sync) are MS-driven, Apple's iOS in the Car has plenty of subscribers already. They have a product, but no longer a platform. I am no genius, but I have a certain idea how that will end.

 

Seems like they could be a big asset for Apple's maps though, particularly as Apple seems to have somewhat of a weakness in areas outside of the US (unless I'm just being misled by trolls), which is presumably a strength for Nokia. Also, Nokia's flyover/street view hybrid tech seems pretty impressive.

 

If Apple did choose to do a street view type function, I think they would want another company doing the grunt work of driving the camera equipped cars around. And with google's needlessly aggressive/expensive acquisition of Waze, it seems like Apple's options may be limited. 

 

Here's the first main link that popped up on Yahoo about the Nokia maps tech:

 

http://www.slashgear.com/nokia-hey-we-do-fancy-maps-too-not-just-google-25253990/


Edited by PatchyThePirate - 9/2/13 at 11:12pm

   

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post #30 of 109
Originally Posted by EricTheHalfBee View Post
Sounds like a great idea to me. Now MS can be in control of the hardware and software (you know, like Apple does).

 

It'll work out great for them! Now they can avoid failures like the Zune, where they controlled the hardware… and… the software… Well, at least they won't screw up like they did with the Kin, where they controlled the soft… ware and the hardware… But seriously now, really, they can't screw up like they did with the Surface, where Microsoft was critical in the design of the software… and… the… hard… Look, but… what about the Xbox! There Microsoft only had control over the… 

 

Geez, Redmond, get it together.

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post #31 of 109
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Originally Posted by drblank View Post

I wonder if there's going to be a shareholder's lawsuit since Nokia actually has quite a bit of cash sitting in short term/ long term investments.  I mean, the market cap is $14 Bil, so Microsoft isn't paying much for the company in those terms, they are getting them dirt cheap actually.

 

Well, they have quite some debt, too. And the latest ER's cash/equivalent positions do not reflect the 50% of NSN acquisition from Siemens yet (which reduces cash and increases debts), as it only becomes effective in the current quarter.

 

What I am not really clear about right now is in how far Nokia's share holders could boycott this deal, as the remainder of Nokia is really worth nothing.

post #32 of 109
Quote:
Originally Posted by PatchyThePirate View Post

 

Seems like they could be a big asset for Apple's maps though, particularly as Apple seems to have somewhat of a weakness in areas outside of the US (unless I'm just being misled by trolls), which is presumably a strength for Nokia. Also, Nokia's flyover/street view hybrid tech seems pretty impressive.

 

Not misled. Apple's POI data in many parts of Europe and Asia is terrible. And Nokia, not in their garbage iOS HERE app, but otherwise, does have better data (don't know much about the street view stuff, as I really have no need for it - never even used it in Google Maps). And I certainly have no idea if Apple would be interested. What I do know is that Apple is putting quite some effort into "fixing" maps on their own - they hired tons of additional people globally and acquired several small companies to complement their mapping product. If they still want to look into something big externally... I just don't know. But then... Apple has tons of "foreign" cash as well, most of it sitting in Europe. A useful acquisition without paying 30% in taxes could make sense.

post #33 of 109
Elop drove it into the ground to make it cheap for Microsoft to buy the division. What a huge surprise.

Nobody saw it coming.

Except the zillion or so bloggers that mentioned it when Elop was selected as CEO and promptly flushed everything down the toilet to focus Nokia on the wonder that is "Windows Phone".
post #34 of 109
Quote:
Originally Posted by Rogifan View Post

So basically Elop was a Trojan horse and he's now back at Microsoft, most likely to replace Ballmer.

I think I remember one or more people on AI predicting this when it was announced that Elop was hired by Nokia.

One thing this does is eliminate Microsoft as a potential bidder for Blackberry. Now who wants BBRY?
post #35 of 109
Quote:
Originally Posted by quinney View Post


I think I remember one or more people on AI predicting this when it was announced that Elop was hired by Nokia.

One thing this does is eliminate Microsoft as a potential bidder for Blackberry. Now who wants BBRY?


Same as before....nobody.

post #36 of 109
Quote:
Originally Posted by drblank View Post

Since Apple and Microsoft have a patent agreement, then Apple can use Nokia technology patents, right?

Possibly but I doubt it as the article first states that MS did not buy the patents but is only licensing the patents but later the wording makes it seem like MS is buying the patents. So only with more time along with more clarification will we have a clue.

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post #37 of 109
Quote:
Originally Posted by drblank View Post

I wonder if there's going to be a shareholder's lawsuit since Nokia actually has quite a bit of cash sitting in short term/ long term investments.  I mean, the market cap is $14 Bil, so Microsoft isn't paying much for the company in those terms, they are getting them dirt cheap actually.

 

 

You are confusing the entire Nokia company and its assets with the part that Microsoft is buying. 

 

"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."

 

Looks like Nokia will retain their HERE services and just licensing use to Microsoft. So Nokia will still own what was Navteq. Plus they are joint owners of Nokia Siemens Networks which is hardware, software, and services for telecommunications networks. Plus they keep their over 40,000 patents and all those assets you pointed out. This lets them dump their mobile business that was not going anywhere and stuff the $5 Billion EUR in the bank and focus on their new future.

 

I'm guessing the shareholders will approve, but after some initial pushback because they are loosing the most visible part of the business that the country of Finland was so proud of. When they realize it was already lost long ago, they will take the money and run. :) My $.02... 

post #38 of 109
Quote:
Originally Posted by Realistic View Post

Quote:
Originally Posted by drblank View Post

Since Apple and Microsoft have a patent agreement, then Apple can use Nokia technology patents, right?

Possibly but I doubt it as the article first states that MS did not buy the patents but is only licensing the patents but later the wording makes it seem like MS is buying the patents. So only with more time along with more clarification will we have a clue.

 

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.

 

http://www.microsoft.com/en-us/news/press/2013/Sep13/09-02AnnouncementPR.aspx

post #39 of 109
Quote:
Originally Posted by Realistic View Post

Possibly but I doubt it as the article first states that MS did not buy the patents but is only licensing the patents but later the wording makes it seem like MS is buying the patents. So only with more time along with more clarification will we have a clue.

 

Several articles on the web, from Forbes, CNBC, WSJ etc. did clarify that MS bought a license to use Nokia patents for 10 years (obviously irrespective of the amount of devices using them). So, Nokia still owns the patents and MS makes a bet... that they will sell enough devices to make that worthwhile.

post #40 of 109
Does this mean we can expect a Nokia Surface now? (Or, more likely, the "Microsoft Nokia Surface Windows RT" given the catchy names Microsoft usually comes up with.)
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