In an unprecedented move Redmond, Washington Microsoft and ESPOO, Finland Nokia today has announced that 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 in EUR 5.44 billion all-cash transaction.
Risto Siilasmaa, Chairman of the Nokia Board of Directors has said ”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,”.
The transaction is expected to close in the first quarter of 2014, subject to approval by Nokia shareholders, regulatory approvals and other customary closing conditions. Microsoft will draw upon its overseas cash resources to fund the transaction.
The terms of the deal
-Microsoft will acquire substantially all of Nokia’s Devices & Services business, including the Mobile Phones and Smart Devices business units as well as an industry-leading design team, operations including all Nokia Devices & Services production facilities, Devices & Services-related sales and marketing activities, and related support functions.
-32,000 people are expected to transfer to Microsoft, including approximately 4,700 people in Finland.
-Nokia’s CTO (Chief Technology Office) organization and patent portfolio will remain within the Nokia Group.
-The operations that are planned to be transferred to Microsoft generated an estimated EUR 14.9 billion, or almost 50%, of Nokia’s net sales for the full year 2012.
-Nokia will grant Microsoft a 10 year non-exclusive license to its patents as of the time of the closing, and Microsoft will grant Nokia reciprocal rights related to HERE services.
-EUR 3.79 billion relates to the purchase of substantially all of the Devices & Services business, and EUR 1.65 billion relates to the mutual patent agreement and future option.
-Additionally, Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four year license.
-Microsoft has agreed to make immediately available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible bonds to be issued by Nokia maturing in 5, 6 and 7 years respectively.
-Microsoft has agreed to a 10 year license arrangement with Nokia to use the Nokia brand on current and subsequently developed products based on the Series 30 and Series 40 operating systems. Upon the closing of the transaction, Nokia would be restricted from licensing the Nokia brand for use in connection with mobile device sales for 30 months and from using the Nokia brand on Nokia’s own mobile devices until December 31, 2015.
What is in future for Nokia?
Nokia plans to focus on its three established businesses, each of which is a leader in enabling mobility in its respective market segment: NSN, a leader in network infrastructure and services; HERE, a leader in mapping and location services; and Advanced Technologies, a leader in technology development and licensing. Nokia Chairman and interim CEO Mr. Siilasmaa has said ”With our strong corporate identity, leading assets and talent, and from a position of renewed financial strength, we will build Nokia’s next chapter.”