In a pair of statements that were recently released, 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. The whole deal is said to go down for $7.17 billion. When the deal comes to a close sometime in the first quarter of 2014, Microsoft is set to pay nearly $5 billion to substantially own Nokia’s Device and Service business, while certain patents will be licensed for an additional $2.2 billion.
Nokia’s current CEO, Stephen Elop, is also expected to step down as part of the deal. Instead, he will become Microsoft’s “Nokia Executive Vice President of Devices & Services.” There has also been some talk of Elop being in the running to replace Microsoft’s outgoing chief executive Steve Ballmer, though no official statements were offered on that front. According to Ballmer:
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. 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 upcoming acquisition is somewhat reminiscent of Google’s $12.5 billion purchase of Motorola in 2012. Unlike the huge smartphone market share enjoyed by Google’s Android, Microsoft’s Windows Phone is a minor player in the segment as of right now.
The market research firm Kantar, estimated Microsoft’s Windows Phone owned a mere 3.5% of the U.S. smartphone market during the July quarter, while Apple’s iOS and Google’s Android held a respective 43.4% and 51.1% share over the same time period.
There are 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 aren’t received.
We’ll have to see how things turn out but it should be noted that this move could potentially impact the mobile industry drastically.
Source: Microsoft via The Verge