Two years after closing its Westchester County office to consolidate its U.S. operations on the West Coast, Finland”™s Nokia Corp. has agreed to sell its devices and services business to Microsoft Corp. in an approximately $7.1 billion cash deal.
The deal, expected to close in the first quarter of 2014, gives Redmond, Wash.-based Microsoft a larger and potentially more profitable share of the mobile devices market, especially with Nokia”™s Lumia smartphones. Lumia sales have grown in each of the last three quarters and reached 7.4 million units in this year”™s second quarter, the companies said in a joint press release.
Microsoft agreed to pay 3.79 billion Euros, or approximately $5 billion, to purchase substantially all of Nokia’s devices and services business, and 1.65 billion Euros, or approximately $2.1 billion, to license Nokia’s patents. Microsoft will draw upon its overseas cash resources to fund the transaction.
The Nokia operations to be transferred to Microsoft generated an estimated 14.9 billion Euros, or about $19.6 billion in 2012, nearly half of Nokia’s net sales for the full year.
At closing, approximately 32,000 Nokia employees are expected to transfer to Microsoft, including 4,700 in Finland and 18,300 directly involved in manufacturing, assembly and packaging of products worldwide.
Nokia President and CEO Stephen Elop with the announcement of the deal stepped aside to become Nokia executive vice president of devices and services and he and several other top Nokia executives are expected to transfer to Microsoft with the closing.
Microsoft is also acquiring Nokia’s mobile phones business unit, which serves hundreds of millions of customers worldwide and had sales of 53.7 million units in the second quarter of 2013. Microsoft will acquire the Asha brand and will license the Nokia brand for use with current Nokia mobile phone products. Nokia will continue to own and manage the Nokia brand.
Nokia will retain its patent portfolio and will grant Microsoft a 10-year non-exclusive license to its patents at the time of the closing. Microsoft will become a strategic licensee of Nokia’s HERE mapping platform and will separately pay Nokia for a four-year license.
Microsoft also announced that Finland will be home for a new data center to serve Microsoft consumers in Europe. The company said it would invest more than a $250 million in capital and operation of the new center over the next few years.
Microsoft CEO Steve Ballmer in the announcement called the deal “a bold step into the future – a win-win for employees, shareholders and consumers of both companies.”
“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. He said the acquisition is expected to be accretive to Microsoft”™s adjusted earnings per share starting in fiscal year 2015.
“For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter,” said Risto Siilasmaa, Nokia board chairman and the company’s new interim CEO. “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. Additionally, the deal offers future opportunities for many Nokia employees as part of a company with the strategy, financial resources and determination to succeed in the mobile space.”
Nokia in 2011 closed its U.S. regional office at 102 Corporate Park Drive in Harrison as part of a global consolidation and eliminated or transferred about 300 positions there. The Finnish cellphone giant had opened the 103,000-square-foot Platinum Mile office in 2006 after investing about $30 million in renovations.
Nokia sold its Harrison property in 2012 to a biotechnology company for $12 million.
