Microsoft sells Nokia feature phone division to Foxconn for $350M

Posted:
in iPhone edited May 2016
Microsoft's steady decline in the mobile phone business continues, as the Redmond, Wash., company announced on Wednesday that it will sell the feature phone division it acquired from Nokia to a subsidiary of manufacturer Foxconn for $350 million.




Foxconn's purchase was made in partnership with HMD Global, a new Finnish company that's been granted an "exclusive global license" to build Nokia-branded phones and tablets for the next 10 years. In short, the $350 million deal means that Nokia devices will once again return to the market.

Manufacturing, sales and distribution from Microsoft's feature phone business will be acquired by FIH Mobile Limited, a subsidiary of Foxconn. HMD and Nokia Technologies, then, will establish a "collaboration framework" for building new Nokia phones and tablets.

The sale -- and subsequent plans for rebirth -- of Nokia's feature phone business are the latest chapter in Microsoft's $7.2 billion purchase of Nokia's mobile phone operations from 2013. Microsoft had hoped the acquisition of Nokia could allow it to improve sales for its floundering Windows Phone division, but in the years since, market dominance by Apple's iPhone and devices running Google's Android has only grown.

Of course, Microsoft had little-to-no interest in the low-margin, shrinking feature phone business, so the sale of that division should come as no surprise. The company had announced internally in 2014 that it was planning to wind down the feature phone business over the course of the following 18 months.

As Windows Phone has floundered, Microsoft has focused on bringing its software and services to rival platforms, like Apple's iOS. For example, Microsoft's own Word Flow keyboard debuted on the iOS App Store last month, allowing for easier one-handed typing.

HMD said on Wednesday that the new agreement with Foxconn and Microsoft includes the right to use the Nokia brand on feature phones, as well as certain design-related rights. HMD plans to invest over $500 million over the next three years to support its Nokia-branded feature phones and tablets.
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Comments

  • Reply 1 of 29
    rob53rob53 Posts: 1,757member
    So Microsoft took an almost $7B hit on this purchase. How did Wall Street respond? They probably said it was a good deal.
    califotoformatmessagepad21001983jony0
  • Reply 2 of 29
    lkrupplkrupp Posts: 5,632member
    rob53 said:
    So Microsoft took an almost $7B hit on this purchase. How did Wall Street respond? They probably said it was a good deal.
    As the article points out Microsoft only sold the feature phone (flip phones, non-smartphones) portion of the business, not the smartphone part. They will continue to make their branded smartphone. That being said it appears Microsoft will be doing the slow fade over the next decade, having missed out on the mobile revolution. They will have to evolve into something else. Services may be the next big growth thing, something Apple is also keenly aware of. Google and Amazon are the leaders in that market right now. Microsoft had better not fumble this time or they could be headed for the dustbin of tech history.
    larrya1983badmonk
  • Reply 3 of 29
    slprescottslprescott Posts: 726member
    Isn't Foxconn's involvement a conflict-of-interest with their heavy involvement in iPhone assembly?

    Or is it like the Samsung relationship: cooperate in one area (assembly) and compete in another area (finished products)? Or maybe it's not a COI because feature-phone are a different category than Apple's smartphones?
  • Reply 4 of 29
    redstaterredstater Posts: 49member
    rob53 said:
    So Microsoft took an almost $7B hit on this purchase. How did Wall Street respond? They probably said it was a good deal.
    And what response did you want Wall Street to have? It was evident that the deal was Ballmer's last parting gift for 2 years, and the new CEO finally wrote off the deal and laid off the Nokia employees last year, to his credit choosing to take the entire hit at once instead of spreading it over 2-3 quarters, and for that reason took a $3 billion operating loss for that quarter. As Microsoft has long since returned to profitability on the strength of their enterprise products - they have the #2 enterprise server OS, the #1 enterprise client OS by a wide margin, the #1 enterprise database, and are the #2 cloud platform as a service company with a big gap between them and #3, plus they have successfully remade the #1 enterprise and consumer productivity suite (again by a huge margin) into a web/cloud/mobile subscription service - how long did you want Wall Street to punish them for their failed attempt to be a hardware company, thinking that they would be as successful there as they were at one point with the XBox? And for what reason? Fewer consumers may be buying Windows desktops and laptops because they are getting mobile devices instead, but Microsoft is still the #1 software company in the world with $94 billion in revenue last year (which puts their $7 billion writeoff in context). The #2 software company? Oracle with $38 billion, and their revenue and profits have been in decline for years. SAP is #3 with $23 billion and no one else even reached $7 billion. Microsoft's $440 billion market capitalization is not only #1, but it is bigger than the market cap of the #2-#10 software companies combined. And for several of their products, no good viable substitutes or competition exists, especially for small to medium-sized enterprises that do not have a lot of IT expertise, and who need all of their enterprise products to work mostly out of the box with very little configuration and a lot of compatibility for that reason. Take Microsoft Office, SQL Server, Windows Server (and all the products that hang off it like corporate email, messaging, document and identity management) away and most of them would grind to a halt. That's why investors took Microsoft's decision not to try to be Sony or Samsung - let alone Apple - and go back to focusing on what made them the world's #1 company for a generation - software and services - as a good thing. A lot of Apple fans keep rooting for Microsoft's decline and death because Microsoft emulated Apple's PC UX/UI back in the day to create Windows. The problem with that is that Windows - while Microsoft's #1 product by far - is nowhere near their only product, and for many of their other products no one - including Apple - offers a good competitor for.
    singularitycnocbuimike1
  • Reply 5 of 29
    calicali Posts: 3,495member
    slprescott said:
    Isn't Foxconn's involvement a conflict-of-interest with their heavy involvement in iPhone assembly?

    Or is it like the Samsung relationship: cooperate in one area (assembly) and compete in another area (finished products)? Or maybe it's not a COI because feature-phone are a different category than Apple's smartphones?

    I was thinking the same thing they could be creeping into an Apple competitor. I also noticed the article mentioned "tablets".
  • Reply 6 of 29
    xbitxbit Posts: 171member
    Isn't Foxconn's involvement a conflict-of-interest with their heavy involvement in iPhone assembly?
    I doubt many people are trying to choose between a Nokia Microsoft Foxconn Asha ($15) and an iPhone ($399+).
    singularitymike1diplication
  • Reply 7 of 29
    sandorsandor Posts: 404member
    Isn't Foxconn's involvement a conflict-of-interest with their heavy involvement in iPhone assembly?

    Or is it like the Samsung relationship: cooperate in one area (assembly) and compete in another area (finished products)? Or maybe it's not a COI because feature-phone are a different category than Apple's smartphones?


    there is only an issue if it conflicts with a supplier contract. otherwise there is no such thing as a conflict of interest.
  • Reply 8 of 29
    gatorguygatorguy Posts: 17,800member
    cali said:
    slprescott said:
    Isn't Foxconn's involvement a conflict-of-interest with their heavy involvement in iPhone assembly?

    Or is it like the Samsung relationship: cooperate in one area (assembly) and compete in another area (finished products)? Or maybe it's not a COI because feature-phone are a different category than Apple's smartphones?

    I was thinking the same thing they could be creeping into an Apple competitor. I also noticed the article mentioned "tablets".
    This isn't really anything new. FoxConn has been working on their own branded products for quite some time. 
    http://www.wsj.com/articles/foxconn-aims-to-fashion-its-own-brands-1403907564
    While Apple is obviously a large client they don't own Hon-Hai nor has it gone unnoticed by them IMHO that Apple is transitioning to other manufacturers for some Apple products, even ones that once upon a time were built exclusively by them. So FoxConn is smart not to be putting all their eggs in the same basket as Apple could pivot further away at any time if (when) better offers come along. It's business, not friends.
  • Reply 9 of 29
    igorskyigorsky Posts: 397member
    sandor said:
    Isn't Foxconn's involvement a conflict-of-interest with their heavy involvement in iPhone assembly?

    Or is it like the Samsung relationship: cooperate in one area (assembly) and compete in another area (finished products)? Or maybe it's not a COI because feature-phone are a different category than Apple's smartphones?


    there is only an issue if it conflicts with a supplier contract. otherwise there is no such thing as a conflict of interest.
    Certainly not in China!
    edited May 2016 nolamacguy
  • Reply 10 of 29
    igorskyigorsky Posts: 397member
    cali said:
    slprescott said:
    Isn't Foxconn's involvement a conflict-of-interest with their heavy involvement in iPhone assembly?

    Or is it like the Samsung relationship: cooperate in one area (assembly) and compete in another area (finished products)? Or maybe it's not a COI because feature-phone are a different category than Apple's smartphones?

    I was thinking the same thing they could be creeping into an Apple competitor. I also noticed the article mentioned "tablets".
    There is no doubt Foxconn has been taking notes on phone production this past decade and will now be putting it to good use, because that's how Asian companies roll.
    edited May 2016 cali
  • Reply 11 of 29
    appexappex Posts: 687member
    Microsoft, the less, the better.
    williamlondon
  • Reply 12 of 29
    sandorsandor Posts: 404member
    igorsky said:
    sandor said:


    there is only an issue if it conflicts with a supplier contract. otherwise there is no such thing as a conflict of interest.
    Certainly not in China!
    Not anywhere, especially in a free market system like the US!
  • Reply 13 of 29
    calicali Posts: 3,495member
    gatorguy said:
    cali said:

    I was thinking the same thing they could be creeping into an Apple competitor. I also noticed the article mentioned "tablets".
    This isn't really anything new. FoxConn has been working on their own branded products for quite some time. 
    http://www.wsj.com/articles/foxconn-aims-to-fashion-its-own-brands-1403907564
    While Apple is obviously a large client they don't own Hon-Hai nor has it gone unnoticed by them IMHO that Apple is transitioning to other manufacturers for some Apple products, even ones that once upon a time were built exclusively by them. So FoxConn is smart not to be putting all their eggs in the same basket as Apple could pivot further away at any time if (when) better offers come along. It's business, not friends.
    That's an easy way to lose your biggest customer and have them place their eggs in another basket too.
    edited May 2016
  • Reply 14 of 29
    lkrupp said:
    rob53 said:
    So Microsoft took an almost $7B hit on this purchase. How did Wall Street respond? They probably said it was a good deal.
    As the article points out Microsoft only sold the feature phone (flip phones, non-smartphones) portion of the business, not the smartphone part. They will continue to make their branded smartphone. That being said it appears Microsoft will be doing the slow fade over the next decade, having missed out on the mobile revolution. They will have to evolve into something else. Services may be the next big growth thing, something Apple is also keenly aware of. Google and Amazon are the leaders in that market right now. Microsoft had better not fumble this time or they could be headed for the dustbin of tech history.
    I agree with everything you said (always do!), but I'm actually one that believes MS *should* be headed for the dustbin of tech history. They don't deserve any other place. They stole, copied and monopoly-exploited their way into success. The one thing they did do would better be characterised as business management. They weren't product managers, ever. They were never revolutionary, they were simply in the right place at the right time for a crook who couldn't come up with an original idea himself to take what was already out there and do it in such a way that precluded anyone else following suit, such was the nature of technology that put them in that unique place, and they exploited it. Every time they try and do something even semi-original, they crash and burn, or they are deemed a success by a sycophantic tech-press filled with people who hate Apple or are too tech-stupid to love Android, just look at the entire Surface line of products, a success, right? What a crock, but hey, let's not apply that same criteria (regarding what makes a success) to other companies, that would be a consistency among journalists acting with integrity, and that's not the world in which we live.

    Yes, it's true I'm down on MS, but what ever did they actually do for the computer industry except hold it back, steal from it, copy from it, act unethically (in ways prosecuted and not) and pretty much hold the entire industry to a standard so low in quality that things like "BSOD" and the "three-finger salute" became synonymous with computing, but hey, MS was making billions at the time, and no one is ever supposed to attack such striking examples of heroism in the business world, where it's all about making money, and nothing else at all.

    This latest move on their part is hardly surprising, cutting their losses as they try and take some of their vast wealth and buy their way into inspiration - they certainly aren't ever going to come up with it on their own. Another failure, ho hum, seems very MS to me.
    edited May 2016 palominecalibadmonk
  • Reply 15 of 29
    mike1mike1 Posts: 1,522member
    redstater said:
    rob53 said:
    So Microsoft took an almost $7B hit on this purchase. How did Wall Street respond? They probably said it was a good deal.
    And what response did you want Wall Street to have? It was evident that the deal was Ballmer's last parting gift for 2 years, and the new CEO finally wrote off the deal and laid off the Nokia employees last year, to his credit choosing to take the entire hit at once instead of spreading it over 2-3 quarters, and for that reason took a $3 billion operating loss for that quarter. As Microsoft has long since returned to profitability on the strength of their enterprise products - they have the #2 enterprise server OS, the #1 enterprise client OS by a wide margin, the #1 enterprise database, and are the #2 cloud platform as a service company with a big gap between them and #3, plus they have successfully remade the #1 enterprise and consumer productivity suite (again by a huge margin) into a web/cloud/mobile subscription service - how long did you want Wall Street to punish them for their failed attempt to be a hardware company, thinking that they would be as successful there as they were at one point with the XBox? And for what reason? Fewer consumers may be buying Windows desktops and laptops because they are getting mobile devices instead, but Microsoft is still the #1 software company in the world with $94 billion in revenue last year (which puts their $7 billion writeoff in context). The #2 software company? Oracle with $38 billion, and their revenue and profits have been in decline for years. SAP is #3 with $23 billion and no one else even reached $7 billion. Microsoft's $440 billion market capitalization is not only #1, but it is bigger than the market cap of the #2-#10 software companies combined. And for several of their products, no good viable substitutes or competition exists, especially for small to medium-sized enterprises that do not have a lot of IT expertise, and who need all of their enterprise products to work mostly out of the box with very little configuration and a lot of compatibility for that reason. Take Microsoft Office, SQL Server, Windows Server (and all the products that hang off it like corporate email, messaging, document and identity management) away and most of them would grind to a halt. That's why investors took Microsoft's decision not to try to be Sony or Samsung - let alone Apple - and go back to focusing on what made them the world's #1 company for a generation - software and services - as a good thing. A lot of Apple fans keep rooting for Microsoft's decline and death because Microsoft emulated Apple's PC UX/UI back in the day to create Windows. The problem with that is that Windows - while Microsoft's #1 product by far - is nowhere near their only product, and for many of their other products no one - including Apple - offers a good competitor for.
    Stop confusing the argument with those pesky facts.
    singularitycali
  • Reply 16 of 29
    igorskyigorsky Posts: 397member
    sandor said:
    igorsky said:
    Certainly not in China!
    Not anywhere, especially in a free market system like the US!

    You're not suggesting that companies in China operate under the same rules and regs as in the US, are you?  A little off topic, but seems like a lot of people still don't get the doing business in China is different than the US.  It's like the wild west over there.
    edited May 2016
  • Reply 17 of 29
    rob53rob53 Posts: 1,757member
    lkrupp said:
    rob53 said:
    So Microsoft took an almost $7B hit on this purchase. How did Wall Street respond? They probably said it was a good deal.
    As the article points out Microsoft only sold the feature phone (flip phones, non-smartphones) portion of the business, not the smartphone part. They will continue to make their branded smartphone. That being said it appears Microsoft will be doing the slow fade over the next decade, having missed out on the mobile revolution. They will have to evolve into something else. Services may be the next big growth thing, something Apple is also keenly aware of. Google and Amazon are the leaders in that market right now. Microsoft had better not fumble this time or they could be headed for the dustbin of tech history.
    So this gets confusing. Please enlighten me if I have things wrong.

    Foxconn/HMD get to use the Nokia name on feature phones but Microsoft's smartphone business is floundering so is there even a smartphone that will use the Nokia name (Nokia Lumia?) or for all intents will Microsoft be leaving the smartphone business altogether (like the article is suggesting). If so, then Microsoft did take a huge hit on their original purchase and shows yet another failed product category. If Microsoft is still in the smartphone business will they continue to use the Nokia brand? If so, how can two companies use the same brand name? (Has Microsoft dropped the Nokia brand, keeping Lumia?)
    cali
  • Reply 18 of 29
    cnocbuicnocbui Posts: 3,613member
    cali said:
    gatorguy said:
    This isn't really anything new. FoxConn has been working on their own branded products for quite some time. 
    http://www.wsj.com/articles/foxconn-aims-to-fashion-its-own-brands-1403907564
    While Apple is obviously a large client they don't own Hon-Hai nor has it gone unnoticed by them IMHO that Apple is transitioning to other manufacturers for some Apple products, even ones that once upon a time were built exclusively by them. So FoxConn is smart not to be putting all their eggs in the same basket as Apple could pivot further away at any time if (when) better offers come along. It's business, not friends.
    That's an easy way to lose your biggest customer and have them place their eggs in another basket too.
    If Apple listened to all the business geniuses on here they, wouldn't have $200 B in cash:  Don't do any business with Samsung, buy inferior more expensive products from competitors, so what if the LG screens on all your RMBPs fail.  Use only TSMC - so what if Apple only sell half what they could have because TSMC haven't the capacity.  Don't have anything to do with Microsoft, build your own cloud infrastructure, don't use Azure.  Stop using Foxconn, find someone else.  Don't have anything to do with Google - and so on, and so on, ad infinitum!
    singularitymike1
  • Reply 19 of 29
    redstaterredstater Posts: 49member
    There is more to this than Nokia's feature phone business. Instead, here is what is going on. Microsoft controls key rights to the Nokia brand until 2022 and does not want to fully relinquish them. Neither do they want to openly compete with their Surface brand, which has value for their enterprise customers. So Microsoft, Nokia and Foxconn are creating a joint effort to make and sell Android phones and tablets. Foxconn will to manufacture, market and distribute the devices under the Nokia brand, to which Nokia and Microsoft will supply software/services/apps as well as some hardware design input. The relationship between the 3 companies will be handled by an intermediary, HMD Global Oy, which is the creation of the 3 companies, based in Finland and run by a "former" Microsoft executive, and will last 10 years. Foxconn will pay licensing fees to HMD, through which both Nokia and Microsoft will be compensated. Nokia and Microsoft will also make money on their various apps and services installed on the devices. So with the combined efforts of the 3 heavyweights, "Nokia" might be a major player in this space. If so, as all 3 companies have made or contributed to very good or even great products in the past, that will be good for consumers. But for the companies that make Android devices, especially small struggling ones like HTC, not so much ...
    gatorguy
  • Reply 20 of 29
    gatorguygatorguy Posts: 17,800member
    redstater said:
    There is more to this than Nokia's feature phone business. Instead, here is what is going on. Microsoft controls key rights to the Nokia brand until 2022 and does not want to fully relinquish them. Neither do they want to openly compete with their Surface brand, which has value for their enterprise customers. So Microsoft, Nokia and Foxconn are creating a joint effort to make and sell Android phones and tablets. Foxconn will to manufacture, market and distribute the devices under the Nokia brand, to which Nokia and Microsoft will supply software/services/apps as well as some hardware design input. The relationship between the 3 companies will be handled by an intermediary, HMD Global Oy, which is the creation of the 3 companies, based in Finland and run by a "former" Microsoft executive, and will last 10 years. Foxconn will pay licensing fees to HMD, through which both Nokia and Microsoft will be compensated. Nokia and Microsoft will also make money on their various apps and services installed on the devices. So with the combined efforts of the 3 heavyweights, "Nokia" might be a major player in this space. If so, as all 3 companies have made or contributed to very good or even great products in the past, that will be good for consumers. But for the companies that make Android devices, especially small struggling ones like HTC, not so much ...
    Nicely researched. :)
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