Recently Microsoft takes over Nokia’s phone business and patents for $7.2 billion. With this deal; Microsoft Corp has entered into an agreement with Nokia for buying off the Finnish company’s phone business and patent licenses at a fair price of $7.2 billion (approximately 5.44 Euros). This Microsoft Nokia deal will brings them into the foray of hardware business and Mr. Stephen Elop back into the scheme of things. It has been two years since Nokia has been trying out hard to balance the market take over by other companies with Windows phone platform. The global business of Nokia was however getting collapsed into abler manufacturers that include Samsung and Apple. The deal announced late Monday now buys both companies to make up for the lost time and come up with a strategy to meld hardware and software into a single cohesive package, similar to Apple’s. However, analysts are pretty unsure whether this new copycat approach will live up to the expectations.
To complicate things for Microsoft, Steve Ballmer, who made the deal for the Redmond, Washington software giant is going to retire in a matter of a year and the company is already seeking out a suitable replacement. There is also a rising doubt whether Microsoft will be able to transform Nokia devices into better weapons to fight the battle against devices powered by the Google Android platform and Apple’s iOS.
The Microsoft Nokia deal didn’t go too well with the investors even. Soon after the announcement; the shares for Microsoft slid by a whopping 6%, reducing the company’s market value by more than $15 billion. Investors showed protect against the acquisition of a company that has been marginalized and under performing while losing more than $4 billion last year in 2012. The move to make turn Microsoft into a gadget and Service Company hasn’t been winning endorsements.
As per the deal, Microsoft is buying out Nokia’s devices and service business while getting access to all its patents. This is costing the company $7.2 billion. The Redmond based company will further have to spend $5 billion revamping the phone making unit and another $2.17 billion on re-licensing patents. The mobile phone business unit of Nokia currently serves more than hundreds of millions of customers worldwide and has in fact sold 53.7 million units in the second quarter of 2013. While Microsoft will now be re-branding the Nokia Lumia and Asha phones, the Nokia brand will continue to be managed by the Finnish company.
With the closing of the Nokia units, more than 32,000 employees are expected to get transferred to the Microsoft brand and this includes 4,700 from Finland itself. As a part of the deal, Nokia is also assigning its long term patent agreement with Qualcomm to Microsoft along with other licenses. Microsoft on the other hand will allow Nokia the reciprocal rights for the HERE services. It has also been announced by Microsoft that the seat of the new data center will now be Finland and this will serve customers in Europe. This will also necessitate an investment exceeding quarter billion dollars for the operation of the new data center for the upcoming years.