Microsoft Corporation has just announced that it plans on purchasing all of Nokia’s Devices & Services business, Nokia’s patents, and use Nokia’s mapping services for a total of EUR 5.44 billion ($7.16 billion) in cash.
In order to carry out the transaction Microsoft will have to use all of its overseas cash resources.
The transaction is predicted to occur in Q1 2014, although the purchase still has to be approved by Nokia’s shareholders.
Microsoft aims to build on the success of Nokia’s Lumia smartphones and increase profit through improving branding, marketing, and strengthening the brand’s financial position.
Microsoft is one of the biggest technology companies in the world, however, many analysts have said that the firm has failed to respond fast enough to the ever-growing market for mobile devices.
This move by Microsoft is a strategy to immerse itself in this market.
Steve Ballmer, Microsoft chief executive officer, said:
“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.”
He added that “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.”
Last year Nokia’s sales performance was very strong, according to the Gartner report “Market Share Analysis: Mobile Phones, Worldwide, 4Q12 and 2012.”
Ballmer said that it is an honor to bring in Nokia’s team of incredible people and assets. The partnership that Microsoft has had with Nokia in the past will make the transition very smooth. Ballmer noted that the acquisition represents major profit opportunities for the company’s shareholders.
Risto Siilasmaa, Chairman of the Nokia Board of Directors and Nokia Interim CEO, said:
“For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter. 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. Additionally, the deal offers future opportunities for many Nokia employees as part of a company with the strategy, financial resources and determination to succeed in the mobile space.”
Stephen Elop, who following today’s announcement is stepping aside as Nokia President and CEO to become Nokia Executive Vice President of Devices & Services, concluded:
“Building on our successful partnership, we can now bring together the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing and manufacturing. With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.”