Microsoft purchases Nokia’s handset business for €5.44 billion cash

Nokia has announced that it is selling the majority of its handset business to Microsoft in a €5.44 billion (US$7.2 billion) all-cash deal, while Stephen Elop has stepped down as Nokia’s CEO.

Microsoft is paying just €3.8 billion for the handset division, and a single payment of €1.65 billion to license Nokia’s patents for the next ten years. Microsoft also receives a licence for Nokia’s mapping services.

The operations that are planned to be transferred to Microsoft generated an estimated €14.9 billion, or almost 50 per cent, of Nokia’s net sales for the full year 2012.

Nokia’s CEO Stephen Elop is stepping aside as Nokia president and CEO but will stay in charge of the mobile phones division as Nokia executive VP of Devices & Services.

Following the purchase, Microsoft said that it aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.

For its part, Nokia plans to focus on its three established businesses — NSN, mapping and its patent portfolio.

"After 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," said Risto Siilasmaa, chairman of the Nokia board of directors and, following today’s announcement, also Nokia interim CEO.

At closing, approximately 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide.

Nokia will retain its headquarters in Finland.

As part of the transaction, Nokia is assigning to Microsoft its long-term patent licensing agreement with Qualcomm, as well as other licensing agreements.

Nokia will continue to own and manage the Nokia brand, but will grant a 10-year licence to use it to Microsoft.

"Following this transaction, Nokia’s financial situation is expected to be significantly stronger and its earnings profile significantly improved," said Nokia CFO, Timo Ihamuotila. "We will have three well-positioned businesses, each a leader in its market. Overall, we will continue to focus on managing and maximising the assets of Nokia Group prudently and pragmatically to create value for Nokia shareholders."