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Steve Balmer / Getty
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/By Clive Minchom/
Steve Balmer may be retiring within a year, but it seems he has been determined to put his final stamp on the company on his way out the door, with a potentially game changing strategic acquisition for Microsoft.
Now Microsoft has just announced it is buying Finnish company Nokia’s Phone Unit for a total of US$7.2 billion – US$5 billion for the phone division itself plus another US$2.2 billion for a license to Nokia’s portfolio of patents in the mobile phone area.
Current CEO of Nokia Stephen Elop is to step down from that position, and will become Executive Vice President of Microsoft’s new Devices and Services Group. Odds are high that the, now returning, ex-Microsoft executive has also just bought his own ticket to become Microsoft’s next CEO as well, replacing Ballmer as his chosen successor.
Nokia Chairman Risto Siilasmaa, who is temporarily taking on Elop’s old job at Nokia CEO as well, said of the deal:
“For Nokia, this is an important moment of reinvention, and from a position of financial strength we can build our next chapter” …“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.”
Microsoft will pick up the more than 30, 000 people who currently work in the Nokia mobile phone business, leaving Nokia still a very large company with over 50, 000 people employed in its networking equipment divisions.
Microsoft are also advancing to Nokia immediately about US$2 billion of interim bond financing, in three tranches, to be redeemed as part of the eventual closing of the acquisition itself. The deal is of course subject to Nokia shareholder approval, which will now be put to a vote at an Extraordinary Shareholders meeting on November 19th, 2013. The transaction is expected to close in the first quarter of calendar 2014.
Microsoft will obtain a 10-year non-exclusive license to Nokia’s mobile phone patent portfolio, which can subsequently be extended indefinitely. They will also have access to Nokia’s popular “Here” mapping and navigation software, under a separate, fee-paying, license agreement between the two companies.
This deal represents Steve Ballmer’s determination to get the phone business right at Microsoft before he leaves, where it had frittered away its own early advantages to both Apple’s iOS and Google’s Android platforms. After also failing badly with its own Symbian operating system, Nokia had adopted Microsoft’s late new-entrant Windows Phone. The shift began when Stephen Elop moved to Nokia from Microsoft early in 2011, though also it must be said with little concrete result to show for it so far. From a 49% smartphone market share in 2007 Nokia’s market share slipped to just 4.3% in late 2012 – i.e. by a factor of ten.
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Speaking after the deal was announced Ballmer said:
“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services” … “In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution.”
“We are excited and honored to be bringing Nokia’s incredible people, technologies and assets into our Microsoft family. Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we anticipate a smooth transition and great execution, ” Ballmer said.
With this deal Ballmer is now clearly hoping that Microsoft can get their phone business back on track after so many, partly self-inflicted, stumbles along the way. He can now sit back watch the results of his handiwork perhaps from retirement on board his own super-yacht….
