information pills mind geneva;”>view "sans-serif"; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi;”>The announcement was made on Tuesday in a statement released by Microsoft revealing that it will purchase substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services.
The statement indicates the company will draw upon its overseas cash resources to fund the transaction.
“The transaction is expected to close in the first quarter of 2014, subject to approval by Nokia’s shareholders, regulatory approvals and other closing conditions.” About 32,000 employees of Nokia will have to transfer to Microsoft.
It should be noted that Microsoft has struggled as consumers have shunned traditional PCs and laptops in favour of smartphones and tablet PCs.
Critics say the firm has been too slow to respond to the booming market for mobile devices. It launched its Surface tablet PCs last year, but sales of the devices have been relatively slow.
But following its partnership with Nokia announced in February 2011 and the increasing success of Nokia’s Lumia smartphones, Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.
For Nokia, this transaction is expected to be significantly accretive to earnings, strengthen its financial position, and provide a solid basis for future investment in its continuing businesses.
Nokia was once a leader in mobile phones, but the firm’s sales fell 24% in the three months to the end of June from a year earlier.
It sold 53.7 million mobile phones during the quarter, down 27% on last year.
However, sales of its new Lumia phones, which run a Microsoft operating system, rose during the period.
In a statement released on Tuesday, Steve Ballmer, Microsoft Chief Executive Officer says, “It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies.”
He adds, “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.”
“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,” explains Ballmer.
Ballmer noted that with their long partnership with Nokia, “We anticipate a smooth transition and great execution.”
“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.
He said after carrying out 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. “
“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,” said Stephen Elop, who following today’s announcement is stepping aside as Nokia President and CEO to become Nokia Executive Vice President of Devices & Services.
“With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.”