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Nokia sells mobile phone unit to Microsoft

Finnish firm seals sale of mobile phone divisions to US company for $7.5bn, in sector where it was once a global leader.

Last updated: 26 Apr 2014 09:28
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Nokia will now focus on networks, mapping services and technology development and licenses [Reuters]

Nokia has announced the completion of the $7.5bn sale of its troubled mobile phone and services division to US-based Microsoft, ending a chapter in the former world leading phone maker's history that began with paper making in 1865.

The Friday closure of the deal, which includes a license to a portfolio of Nokia patents, follows delays in global regulatory approvals and ends the production of mobile phones by the Finnish company, which had led the field for more than a decade, peaking with a 40-percent global market share in 2008.

Nokia said the total transaction price would be "slightly higher" than when it was originally announced on September 3 because of adjustments made for net working capital and cash earnings.

The deal was to have closed during the first quarter but was held up because of delays in approvals, including from China, the AP news agency reported.

Nokia, a significant contributor to the Finnish economy, gradually lost its grip on the market as it failed to meet the smartphone challenge of Apple's iPhone, Google's Android operating system and cheaper competitors in Asia.

In an attempt to reverse the slide, it teamed up with Microsoft in 2011, replacing its old operating system with one based on Windows, but it took them eight months to produce the first Nokia Windows Phone, and consumers did not warm to the handset or subsequent models.

Nokia will now focus on networks, mapping services and technology development and licenses, saying it will give more details of the deal and future plans when it releases first-quarter earnings on April 29 - the last report to include the ailing devices and services division.

It is also expected to name the new Nokia chief executive.

Excluded plants

Nokia said two plants will remain outside the deal; a manufacturing unit in Chennai, India, subject to an asset freeze by Indian tax authorities, and the Masan plant in South Korea, which it plans to shut down.

The adjustments have no impact on the deal and Nokia "will be materially compensated for any retained liabilities," the company said.

Microsoft said it will acquire about 25,000 Nokia employees in 50 countries, including 4,700 in Finland, leaving the Finnish company with 6,000 workers in the Nordic country.

The Nokia headquarters in Espoo, near the Finnish capital, Helsinki, were draped on Friday in a banner with the words "On the Move."

They will be taken over by Microsoft and Nokia's remaining workers in the area will move to nearby offices.

"Microsoft will have a lot of work to do in the handset business," Sven Grundberg of the Wall Street Journal told Al Jazeera. Their market position is pretty dismal, owning only 4 to 5 percent of the total phone market. They will have a lot of work to do with this unit, if they want the acquisition to mean something to them," he explained.

Microsoft said that former Nokia chief executive Stephen Elop will serve as executive vice president of the Microsoft Devices Unit, which will include Nokia's former Lumia smartphones and tablets, AP reported.

Microsoft Mobile Oy, a subsidiary of Microsoft, will develop, manufacture and distribute Lumia, Asha and Nokia X mobile phones and other devices, it said.

Nokia's share price remained almost unchanged, closing at $7.25 on the Helsinki Stock Exchange.

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