Stephen Elop heads back to Microsoft as it acquires Nokia’s Devices & Services business

Stephen Elop at a past Microsoft event before he moved to Nokia.
Stephen Elop at a past Microsoft event before he moved to Nokia.

After just over 2 years at Nokia as CEO, Stephen Elop is headed back to his former employer, Microsoft together with 4 other top Nokia executives – Jo Harlow, Juha Putkiranta, Timo Toikkanen and Chris Weber.

In an announcement made today, Microsoft has also acquired Nokia devices and services business and will now license Nokia’s patents, and license and use Nokia’s mapping services.

As part of the deal, Microsoft will pay EUR 3.79 billion to purchase substantially all of Nokia’s Devices & Services business, and EUR 1.65 billion to license Nokia’s patents, for a total transaction price of EUR 5.44 billion in cash.

Microsoft will also draw upon its overseas cash resources to fund the transaction. The transaction is expected to close in the first quarter of 2014, subject to approval by Nokia’s shareholders, regulatory approvals and other closing conditions.

“Building on the partnership with Nokia announced in February 2011 and the increasing success of Nokia’s Lumia smartphones, Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing. For Nokia, this transaction is expected to be significantly accretive to earnings, strengthen its financial position, and provide a solid basis for future investment in its continuing businesses,” states the release.

As part of the transition, various changes are also expected at Nokia. 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. The operations that are planned to be transferred to Microsoft generated an estimated EUR 14.9 billion, or almost 50 percent of Nokia’s net sales for the full year 2012.

With the acquisition, Nokia is bidding “GOODBYE” to the mobile devices business as Microsoft is acquiring its Smart Devices business unit, including the Lumia brand and products. Lumia handsets have grown in sales in each of the last three quarters, with sales reaching 7.4 million units in the second quarter of 2013.

Nokia’s Mobile Phones business unit had sales of 53.7 million units in the second quarter of 2013.

“Microsoft will also 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. This element provides Microsoft with the opportunity to extend its service offerings to a far wider group around the world while allowing Nokia’s mobile phones to serve as an on-ramp to Windows Phone,” states the release.

Microsoft will also immediately make available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible notes that Microsoft would fund from overseas resources. If Nokia decides to draw down on this financing option, Nokia would pay back these notes to Microsoft from the proceeds of the deal upon closing. The financing is not conditional on the transaction closing.

Microsoft also announced that it has selected Finland as the home for a new data center that will serve Microsoft consumers in Europe. The company said it would invest more than a quarter-billion dollars in capital and operation of the new data center over the next few years, with the potential for further expansion over time.