Microsoft announced Monday night that it will purchase Nokia's devices business in a deal that will bring the Lumia smartphone line—along with Nokia CEO Stephen Elop—under the Microsoft umbrella.
The deal has been valued at 5.44 million euro ($7.17 billion), wth 1.65 billion euro of that going to license Nokia's patents. Microsoft will also provide Nokia an additional 1.5 million euro ($1.98 billion) in convertible notes that Nokia can exercise. Microsoft isn't buying Nokia as a whole, as the Nokia Siemens Networks enterprise business, Nokia's HERE brand, the office of the CTO, and Nokia's patent portfolio are not direct components of the deal.
The synergies of the aquisition are obvious. Elop led the Microsoft Business Division until 2010, at which point he became Nokia's chief executive, forging deep ties with Microsoft, and almost totally committing his company to the Windows Phone platform. Elop will lead "an expanded Devices business" at Microsoft, the company said, and will report directly to soon-to-be-departing CEO Steve Ballmer. Julie Larson-Green, who currently leads the Devices and Studios business (which includes the Xbox One and Surface tablets) will report to Elop after the deal is expected to close in the first quarter of 2014.
The most important piece of the puzzle is Nokia's phone business, including the Lumia brand. Nokia sold 7.4 million Lumia phones in the second quarter of 2013, and 53.7 million units overall. For now, Microsoft said that it would license the Nokia brand and use it with current Nokia phone products. Lumia, presumably, will fall under the Microsoft brand name.
"One brand, united voice," Microsoft said in a presentation packet explaining the deal.
Of course, the deal is a slap in the face to HTC (among other handset makers), which must now assume it will play permanent second fiddle to Nokia in the Windows Phone smartphone game. Indeed, the HTC 8X was a key hardware element of Microsoft's Windows Phone 8 launch, but overall the Lumia name has become synonymous with Windows Phone. Overall, Windows Phone ranks third among smartphone platforms, with a tiny 3.2 percent in May.
Nevertheless, Microsoft's Steve Ballmer, who roiled the waters when he unexpectedly said he would step down within a year's time, painted the deal as a positive for the company.
"It's a bold step into the future — a win-win for employees, shareholders and consumers of both companies," Ballmer said in a statement. "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."
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