Nokia Sells Devices Business to Microsoft

It's almost unthinkable, but by early 2014 Nokia will no longer be in the mobile phones business, having agreed to sell its devices and services business to partner Microsoft for €5.44 billion (US$7.2 billion) in cash.

Microsoft Corp. (Nasdaq: MSFT) is acquiring almost all of Nokia Corp. (NYSE: NOK)'s Devices & Services business, including its Mobile Phones and Smart Devices portfolio and its Devices & Services production facilities, sales and marketing activities and support functions. About 32,000 Nokia staff will transfer to Microsoft, including 4,700 staff in Finland.

According to Nokia, the business being sold generated revenues of €14.9 billion ($19.6 billion) in 2012. What Nokia didn't mention is that those revenues came with an operating loss of more than €1 billion ($1.32 billion). (See Nokia's 2012 full year financials.)

Microsoft also gets a 10-year non-exclusive license to Nokia's patents, including the Nokia brand, with an option to extend that license.

Nokia says the sale price comprises €3.79 billion ($5 billion) for the Devices & Services business and €1.65 billion ($2.17 billion) for the patents license.

The deal, which is expected to close in the first quarter of 2014, gave Nokia's stock a massive boost early Tuesday, as its share price shot up by nearly 42 percent to €4.20 on the Helsinki exchange.

News of the deal has also heralded a reshuffle of the management team, with Nokia's chairman Risto Siilasmaa becoming interim CEO. Current CEO Stephen Elop becomes executive vice president of the Devices & Services business being sold to Microsoft, ensuring his transfer back to his former employer.

Smartphone disaster
Nokia, for so long the mobile handset market leader, has been struggling for several years, having failed to embrace the smartphone revolution early and aggressively enough. (See Nokia Loses Its Mobile Crown.)

It appointed former Microsoft executive Elop as CEO in late 2010 and quickly dumped the Symbian and MeeGo operating systems in favor of… Microsoft's Windows Phone OS. And by the time it launched its first next-generation Windows Phone devices in late 2011 it had initiated a major restructuring program and had struck a deeper relationship with Microsoft. (See Nokia Unveils Major Revamp, Nokia Puts Microsoft Strategy Into Action, and Nokia Cuts 4,000 Jobs, Sheds Symbian.)

But the resulting Lumia smartphones haven't been able to compete in a world dominated by Apple and the many handset manufacturers exploiting Android's popularity, including new market leader Samsung.

And ever since the Nokia/Microsoft partnership was announced, there has been speculation that the software giant would end up swallowing its Finnish friend. (See OS Watch: Nokia & Microsoft Headed to the Altar?.)

The deal is another sign that the balance of power in the mobile device sector has swung dramatically during the past few years and that no vendor can rest on its laurels. Nokia isn't the only former giant that failed to adapt from a position of strength: Blackberry's demise has been equally as notable. (See Selling BlackBerry: The Options and BlackBerry: Is There Still Value? )

And it seems likely there is further upheaval to come in the mobile device market. (See Falling ASPs Foretell a Smartphone Shakeup.)

Nokia: What's left?
Once Nokia has offloaded its devices and services business, it will be left with 56,000 staff (based on headcount at the end of June 2013), its patent portfolio, its technology development operation, and three lines of business that generated revenues of €15.3 billion ($20.1 billion) in 2012:

  • Nokia Solutions and Networks (NSN), the infrastructure vendor recently brought completely on board, which accounts for about 50,500 of the remaining staff and which generated revenues of €13.78 billion ($18.1 billion) in 2012. (See NSN Becomes NSN, Nokia to Take Full Control of NSN, and Has NSN Turned a Corner?.)

  • HERE, the company's cloud-based mapping and location services platform, for which Microsoft will become a licensee.

  • Advanced Technologies, which manages Nokia's patents and develops new technologies.

    — Ray Le Maistre, Editor-in-Chief, Light Reading

  • Page 1 / 3   >   >>
    Kruz 11/20/2013 | 5:35:31 AM
    Re: The black sheep now is Nokia Corp. For Chinese players, the trend seems different for the likes of ZTE and Huawei who are investing heavily in the handset division. With a low manufacturing cost, these players were quickly able to gain market share, especially now that delivering handsets became much easier (with Android available for all OEMs).

    Instead, companies are turning to "less volatile" industries where they do stand a chance. Looks at Siemens, years ago, when it reverted back to its very traditional business and heavier industry (nuclear reactor for example).
    DOShea 9/4/2013 | 12:08:38 AM
    Re: The black sheep now is Nokia Corp. So what is it about the network infrastructure business that makes sinking companies grab onto it like a life preserver? The profit margins? It sure can't be the painfully long sales cycles.
    R Clark 9/3/2013 | 9:35:32 PM
    Re: The black sheep now is Nokia Corp. Nokia is treading a well-worn path.

    Ericsson, Nortel, Siemens, Alcatel, Motorola, and AT&T/Lucent all sold off their handset divisions and held onto their networks business.

    Nokia were lucky to have Microsoft take their business off their hands. Interesting that they're staying in the mapping game. Then again, they paid more for Navteq than they got for their devices unit. 



    eurichardson 9/3/2013 | 5:29:19 PM
    Nokia Sells to Microsoft For folks who have been involved in the mobile devices business for a long time, this is almost like watching a species go extinct. Darwin's theory of evolution is at play here - only the fittest ones that can adapt and evolve will survive. Motorola Devices suffered the same fate some time back. 

    RIP Nokia.

    RitchBlasi 9/3/2013 | 3:22:34 PM
    Nokia disaster Quantity is only one factor to consider. While Nokia may have outpaced Apple in sales (for whatever year it was that you cited) the quality of the product, its longevity, sustainability and innovation is what proves to be a leader. Yes, they had smartphones but the iPhone was THE game changer. Never heard of anyone waiting in line for a Nokia....right? Now everything is measured against the iPhone. Can't compare what Nokia delivered against the likes of Apple and Samsung. Nokia's big differentiator now is a 41megapixel camera phone. That may be a great camera but not the smartest phone.
    lanbrown 9/3/2013 | 1:20:31 PM
    Re: Feature phones? Does it though?  Nokia was not responsible for 100% of the WP sales and do you really think that HTC and Samsung are going to continue to sell WP?  Microsoft was already seeing their market share percentage drop and this will cause another hit to it.


    Microsoft is also going to see competition from Jolla (Saildfish), Ubuntu and Firefox.  They have shown that they cannot compete with Android and Apple and could barely beat BB.  Nokia is also free to start selling phones again 30-months after the deal closes.  They can also license their patents to anyone they want as well.  What made Nokia great was their hardware and their patents and now that is not going with the devices division.  Nokia sued HTC over an HD microphone.  Now they can freely license that and that is one less "feature" that Microsoft has to differentiate its phone from the others.  The market has spoken and it has aid no to WP time and time again.  As for what took this deal so long; with Balmer retiring and his approach being to shove Windows everywhere, he wants to make sure that still happens after he leaves.  So, by buying Nokia that keeps that up.  Look at how Microsoft has done with Windows RT!  Like they are going to do any better with a device division now.  How many companies will look at doing another Windows RT tablet now!


    Google can get away with offering their own devices; Microsoft is no Google.  They are trying to compete with their partners and that is never a good way to do business.  Microsoft needs them more than they need Microsoft.
    lanbrown 9/3/2013 | 1:12:26 PM
    Reality "Smartphone disaster

     Nokia, for so long the mobile handset market leader, has been struggling for several years, having failed to embrace the smartphone revolution early and aggressively enough."

    Embrace the smartphone revolution?  Where did you ever come up with that?  The sold smartphones long before Apple ever even started to think about a mobile phone.  Look at the Communicator series and how far they date back.  That was one of the very first smartphones sold.  While Apple was selling less than 40 million iPhones a year, Nokia was selling more than 130 million smartphones.

    The truth is out there if you open your eyes.
    RitchBlasi 9/3/2013 | 11:20:59 AM
    The Device Ain't Right Seems to me that two wrongs aren't going to make it right. Both have failed miserably over the years one at retaining share and the other entering the mobile market. While having a clear lead over BB - which isn't hard at this point - the jump to the next level is significant and will take the innovation of an Apple or Samsung to do something like that. I just don"t see that happening. That said, third place ain't a bad position to be in at this point in time.
    kaop 9/3/2013 | 10:22:21 AM
    Re: Feature phones? This places Microsoft firmly into third place and another nail in BlackBerry's coffin.  Which begs the question, what took them so long?
    melao2 9/3/2013 | 9:54:21 AM
    The black sheep now is Nokia Corp. It is funny to think that, not only 5 years ago Nokia was the handset leader, but also to think that not long ago NSN was the black sheep of Nokia Corp.

    Now NSN is Nokia (apart from the other two smaller parts). 

    Think about also that Ericsson (prior to Sony-Ericsson) was a major player in the handset division, and now they're gone from that market but kept their leadership in the infrastructure and carrier services area. Maybe that's the fate of both scandinavian companies.

    Alcatel also has always had a smaller handset division that never took off. 

    On the other hand we have the chinese ZTE and Huawei making strides in both infrastructure and handset divsions. Will they fail also in the handset division?
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