Nokia on Tuesday said it was selling its beleaguered mobile phone unit to Microsoft for $7.17 billion (5.44 billion euros) as the US tech giant tries to fight back against rivals Apple and Google.
Investors cheered the news, as Nokia’s share price soared by 45% in opening trading on the Helsinki stock exchange to 4.3 euros.
The move unites Windows Phone 8 with its biggest hardware supporter, giving the company the integrated mobile offering it’s been looking for with Surface and other devices. When the deal closes in the first quarter of 2014, Microsoft will pay €3.79 billion for Nokia’s business, plus another €1.65 billion for its portfolio of patents. (The €5.44-billion total is considerably less than Microsoft paid for Skype in 2011.) 32,000 people are expected to transfer from Nokia to Microsoft, including 18,300 that are “directly involved in manufacturing.”
The purchase comes on the heels of what appeared to be a failed acquisition in June, at which point it seemed conversations had broken off entirely. Now the two come together, in what outgoing Microsoft CEO Steve Ballmer called “a bold step into the future.” In an email, Ballmer cited the Lumia 1020 as an example of what the companies could do together, but said the phone hadn’t caused the marketshare bump it deserved. “Now is the time to build on this momentum and accelerate our share and profits in phones,” he wrote.
Microsoft said the deal, which is expected to close in the first quarter of next year, would not add to earnings until 2016.
Nokia said 32,000 employees would transfer to Microsoft, of whom 4,700 would be in Finland. Microsoft already has 12,000 employees in Europe. Mr Ballmer said a new data centre servicing Microsoft consumers would be built in Finland, with an investment of $250m over the next few years.
Nokia expects to book a gain of €3.2bn from the sale and will now be focused on three main areas: NSN, its telecoms equipment business that it recently seized control of from Siemens; its Here mapping business; and a new unit known as Advanced Technologies to develop technology and license patents. It has the option to use €1.5bn in financing from Microsoft to help with the NSN purchase and protect its dwindling cash pile.
Nokia says that once the sale is completed, it will concentrate on three key businesses – network equipment manufacturing, mapping and location services, and the development and licensing of technology.
Earlier this year, it agreed to buy Siemens’ 50% stake in their joint venture, Nokia Siemens Networks (NSN), which makes telecoms network equipment, for 1.7bn euros.