When Microsoft and Nokia formed a strategic alliance around Window Phone in 2011, there were plenty of rumors that the software giant would acquire the handset maker. Now, those rumors have become reality.
Microsoft is snapping up substantially all of Nokia's devices and services business, as well as licensing Nokia's patents, and licensing and using Nokia's mapping services in an all-cash deal valued at $7.2 billion. The deal is expected to close in the first quarter of 2014.
Steve Ballmer, CEO of Microsoft, called the acquisition a "bold step into the future" and 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," said 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."
A Smooth Transition
Microsoft is betting the Nokia acquisition will accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing. Ballmer expected a smooth transition, considering how closely the companies have worked together over the past two years. What does Nokia expect?
"For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter," said Risto Siilasmaa, chairman of the Nokia board of directors and interim CEO. "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."
Stephen Elop has stepped down as president and CEO of Nokia. He will now serve as Nokia's executive vice president of Devices & Services. Nokia expects key executives, including Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber, to stay on board at Microsoft after the transitions. With Microsoft on the hunt for CEO, some are already rumbling about Elop's potential race to the top in Redmond.
Attractive to Enterprises
We caught up with Michael Disabato, managing vice president of Network and Telecom at Gartner, to get his take on the deal. He told us this could be part of Microsoft's move to take Windows Phone into the enterprise.
"From an IT perspective you can make a dashboard out of the live tiles. You can set up the CEO's Windows Phone so he can see everything in the company that is of value to him without going into any of the applications," Disabato said. "The concept of real-time dynamically changing icons on your home screen is a powerful, compelling story. They haven't been able to do anything with it."
Also compelling from an enterprise IT perspective is the fact that developers can program and write code for Windows Phone 8 with the same tools used for the desktop. Microsoft also hedges against Android by buying Nokia as it prevents the handset maker from designing for Google's mobile operating system.
"There weren't many people interested in buying BlackBerry. Microsoft was one of them. Now that's not going to happen. Microsoft wants to get more Windows Phones out there. BlackBerry will get bought and broken up," Disabato said. "Microsoft will become a distant third in the mobile operating system world."