Yesterday evening Microsoft Corporation and Nokia Corporation announced that the Boards of Directors for both companies have decided to enter into a transaction whereby Microsoft will buy substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services.

Microsoft will pay EUR 3.79 billion (USD $5 billion) to buy substantially all of Nokia’s Devices & Services business, and EUR 1.65 billion (USD $2.2 billion) to license Nokia’s patents, for a total transaction price of whooping EUR 5.44 billion (USD $7.2 billion) in cash. The transaction is expected to close in the first quarter of 2014.

Microsoft will acquire substantially all of Nokia’s Devices and Services business, including the Mobile Phones and Smart Devices business units as well as an industry-leading design team, operations including all Nokia Devices & Services-related production facilities, Devices & Services-related sales and marketing activities, and related support functions.
Approximately 32,000 Nokia employees are expected to transfer to Microsoft including Nokia CEO Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber and also 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.

Since February 2011 Nokia has been in partnership with Microsoft to manufacture Windows-based smartphones and with success of Nokia 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.

Nokia will keep its patent portfolio and will grant Microsoft a 10-year license to its patents at the time of the closing. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services. In addition, Nokia will grant Microsoft an option to extend this mutual patent agreement in perpetuity.

Superficially, Nokia is a lone manufacturer of Windows-based smartphones and it is also rumored that Nokia is building a 10.1 inch Windows-based tablet and in order to compete with Apple iOS and Android this is considered as important strategical move of Microsoft towards technological advancement for Windows-based mobile devices & tablets.

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