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

Posted:
in General Discussion edited January 2014
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.
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Comments

  • Reply 1 of 109


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

  • Reply 2 of 109


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

  • Reply 3 of 109
    <span style="color:rgb(24,24,24);font-family:arial, helvetica, sans-serif;line-height:18px;">Basically expected. They all but owned it already. Now for them to flush it down the toilet like HP did Palm.</span>

    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.
  • Reply 4 of 109
    rogifanrogifan Posts: 10,669member
    So basically Elop was a Trojan horse and he's now back at Microsoft, most likely to replace Ballmer.
  • Reply 5 of 109
    simtub wrote: »
    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.
  • Reply 6 of 109
    kibitzerkibitzer Posts: 1,113member
    "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.
  • Reply 7 of 109
    dreyfus2dreyfus2 Posts: 1,070member

    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.

  • Reply 8 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.

  • Reply 9 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...
  • Reply 10 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?

  • Reply 11 of 109
    drblankdrblank Posts: 3,383member


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

  • Reply 12 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.

  • Reply 13 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?



     


    Would think so.

  • Reply 14 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?  

  • Reply 15 of 109
    dreyfus2dreyfus2 Posts: 1,070member

    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.

  • Reply 16 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.

  • Reply 17 of 109
    pmcdpmcd Posts: 393member
    Hardly the same. Very smart move by Microsoft. Motorola is not Nokia.

    Philip
  • Reply 18 of 109
    dreyfus2dreyfus2 Posts: 1,070member

    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.

  • Reply 19 of 109
    drblankdrblank Posts: 3,383member


    $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.

  • Reply 20 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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