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