Nokia sells mobile phone unit to Microsoft

HELSINKI, Finland (3rd UPDATE) – Beleaguered Finnish mobile phone maker Nokia will sell its mobile phone unit to US group Microsoft for 5.44 billion euros ($7.17 billion).

Nokia announced on Tuesday, September 3, it will grant Microsoft a 10-year non-exclusive license to its patents and will itself focus on network infrastructure and services, which it called “the best path forward for Nokia and its shareholders.”

The company also announced the immediate departure of chief executive Stephen Elop. He will be replaced in the interim by Risto Siilasmaa, Nokia’s chairman of the board.

Nokia was long the global leader in making mobile phones but has been overtaken by rivals Samsung and Apple as it struggled to establish winning business models and mobile devices.

READ: Nokia up for sale?  

The transaction announced Tuesday is expected to be completed in the first quarter of 2014, pending approval by Nokia shareholders and regulatory authorities.

Microsoft announced the acquisition on numerous fronts, with Steve Ballmer citing in an email that Nokia Windows Phones are the fastest-growing phones in the smartphone market and that this acquisition would allow Microsof to “build on this momentum and accelerate our share and profits in phones.”

In a separate open letter from Ballmer and Elop, they wrote, “With the commitment and resources of Microsoft to take Nokia’s devices and services forward, we can now realize the full potential of the Windows ecosystem, providing the most compelling experiences for people at home, at work and everywhere in between.”

Some 32,000 Nokia employees are expected to transfer to Microsoft, including approximately 4,700 people in Finland, the company said.

The operations affected by the transfer generated approximately 14.9 billion euros in 2012, or almost 50 percent of Nokia’s net sales, the company said.

Of the total purchase price of 5.44 billion euros, 3.79 billion relates to the purchase of Nokia’s Devices & Services business, and 1.65 billion relates to the mutual patent agreement and future option.

Last month, Nokia finalised the purchase of German engineering giant Siemens’ 50 percent stake in Nokia Siemens Networks for 1.7 billion euros.

NSN, which is specialised in high-speed mobile broadband, was set up as a joint venture between the two companies in 2007, a partnership that expired in April. The unit has posted stronger earnings than Nokia’s mobile phone business.

NSN posted a net profit of 8.0 million euros in the second quarter of this year, compared to Nokia’s net loss of 227 million euros in the same period. – with reports from Rappler.com and Agence France-Presse