3 September 2013

Microsoft acquires Nokia


Microsoft is to acquire Nokia’s mobile phone business, including its patents and mapping services, in a $7.2bn deal.  Analysts believe the deal is aimed mainly at speeding up innovation within Windows Phone and protecting its future through Nokia’s valuable patents.


The companies said in a joint news release that the deal will be finalised in early 2014, when about 32,000 Nokia employees will transfer to Microsoft.  Microsoft will acquire Nokia's hardware business, the Lumia phones, and its design teams and production facilities.  Nokia keeps its patent portfolio and will license it to Microsoft on a 10-year basis, which can be extended in perpetuity.


The move comes two and a half years after the companies announced a strategic partnership in an attempt to regain market share lost to the rival iPhone and Android smartphone operating systems.  Android dominates with a 79% share of the market in the second quarter of 2013, followed by iOS with 14.2%.  Windows Phone is third, yet had only 3.3% market share in the quarter, according to Gartner.


"It's a bold step into the future - a win-win for employees, shareholders and consumers of both companies.” said outgoing Microsoft CEO Steve Ballmer.


"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."


Nokia CEO Stephen Elop stated "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."


Between 2008 and 2010, Stephen Elop headed up Microsoft's Business Division, taking charge of the Microsoft Office product.  He is to return to Microsoft where he will lead an expanded devices team, reporting to Ballmer.  He is now widely tipped to be the next CEO at Microsoft, following Ballmer’s recent retirement announcement.


The deal between the two companies is expected to help Microsoft to be more competitive in the mobile market by enabling tighter integration between the hardware and the operating system.


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