Microsoft buys Nokia mobile business and patents

After a big buyout in the telecoms industry yesterday, Microsoft has followed suit by purchasing the mobile phone unit of Nokia for $5 billion and patents for $2.2 billion which makes the purchase amount to $7.2 billion.

With this new development, Nokia CEO Stephen Elop who was the president of the business division of Microsoft before moving to Nokia in 2010 will once again become an employee of Microsoft.

Nokia's Stephen Elop with Microsoft's Steve Ballmer. Image: Phys.org

Stephen Elop will step down as Nokia CEO to become the executive vice president of the extended device division at Microsoft. This division apart from Nokia unit includes both the Xbox and Surface.

There have been various rumours before about Microsoft taking over Nokia and it seems this was the time for Microsoft as it looks to keep up with the competition in mobile devices in the face of declines in PC demands, a sector Microsoft has dominated for about 30 years.

“To accelerate our growth in the phone business, we thought it was important to move even faster,” Microsoft CEO Steve Ballmer said in a phone interview.

It must be noted however that this is only a deal to take over the mobile unit of Nokia and not the whole of Nokia.

Although the mobile unit is the biggest unit in Nokia as it contributed about $19.7 billion in revenues for Nokia in 2012, about half of Nokia’s total revenue, there are other parts of Nokia like networking infrastructure and services, technology development and licensing, and mapping and location services which are still part of Nokia. Nokia Chairman Risto Siilasmaa will now be the CEO of the remaining Nokia.

Stephen Elop has been one of the favourites been touted for the position of the CEO at Microsoft after present CEO Steve Ballmer retires which is due in the next 12 months. With this move, Stephen Elop has turned from an external candidate to an internal candidate according to Ballmer.

“Stephen will go from external [candidate] to internal,” Ballmer said. “The board will continue [to look at] all appropriate candidates through that process.”

About 32,000 employees who are in Nokia’s Devices and Services division will remain in the Nokia facilities around the world but will now work for Microsoft. About 4,700 of them who work in the research and development, engineering, design and operations will also remain in Finland.

This is not the first dealing between the two parties as Nokia has been using the Windows Phone OS since 2011 when it dropped its Symbian OS for Microsoft’s. Nokia is also the biggest vendor of the Windows Phone OS. It is reported by IDC that Nokia Lumia smartphones sold 7.4 million units in the second quarter of this year.

Windows Phone OS still have a long way to go as it still has less than 4% of the smartphone market which Google’s Android and Apple’s iOS dominates. Perhaps this move could see Microsoft have a larger share in the smartphone market? Only time will tell.

The deal will be finalized in the first quarter of 2014 after approval from the regulatory commissions and the deal will be paid for by Microsoft’s cash reserves.

Posted in Microsoft, Nokia, Smartphones