The Microsoft takeover of Nokia handset business for Euro 5.4 Billion helps a sudden increase in Nokia’s Market shares.
Microsoft has announced the cash purchase of Nokia’s Mobile phone business and patent licenses for a whopping 5.44 billion Euros (equivalent to 7.2 billion US Dollars; 4.6 billion Pounds). This has caused an immediate surge of Nokia’s shares by around 35.05 %. And subsequently the Microsoft shares fell by around 5.02 %. This deal has got the Europe’s big handset makers into US ownership and helps Microsoft move into device manufacturing business.
The agreement consists of 3.80 billion Euros towards all the Nokia devices and service businesses. And 1.66 billion Euros to license all of Nokia’s patents. The statement said that this transaction is expected to finish in Q1 of 2014 subject to regulatory approvals, Nokia share-holder’s approvals and other closing conditions. However the patent portfolios of Nokia will be retained with them. At the time of closing the deal Nokia has agreed to grant Microsoft 10 year license for its patents and reciprocate with similar rights to use Microsoft patents of its maps and location based services.
Before this acquisition in February 2011, both Microsoft and Nokia entered into a partnership agreement for the launch of Lumia brand smart phones which runs on Windows OS. And since then Nokia’s Lumia sales increased 112.7 % and the same continued in Q2 this year.
Certainly a bold step for its employees, shareholders and even consumers from both the companies. This will accelerate Microsoft shares and profits on phones and toughen the overall opportunities for both Microsoft and its partners across its entire family of services and devices.
Risto Siilasmaa the then chairman of the Nokia board of directors and now the Interim CEO of Nokia, said in a statement that for Nokia, from a position of financial strength and as an important moment of rediscovery, they can build their next chapter.
Stephen Elop is stepping aside as Nokia’s president and CEO to become the executive Vice-President of Devices and Services. Before his departure as the CEO, Steve Ballmer from Microsoft wants to cement his realignment of Microsoft as a software and devices business.
Already funneling a lot of cash into Nokia, Microsoft wanted to support its smartphone business, with limited effect. Now Microsoft can fully concentrate of developing and marketing an integrated smartphone proposals. And this puts it in a stronger position to compete.
Elop also mentions that with this successful partnership, they can bring together the best of Microsoft’s software engineering along with Nokia’s product engineering and award-winning designs along with its global sales, marketing and manufacturing. Nokia brand Asha phone with licenses will also be acquired by Microsoft.