The world's largest software maker,
) announced that it was buying Finnish company
) handset business for $7.2 billion (5.44 billion euros). The
deal should close in the first quarter of 2014, subject to
approval by Nokia's shareholders and regulators.
Microsoft is paying about $5 billion (EUR 3.79 billion) for
Nokia's Devices & Services Business and about $2.18 billion
(EUR 1.65 billion) to license Nokia's patents for 10 years and
use Nokia's mapping services for 4 years.
Following the acquisition, Nokia's Chief Executive Officer
(CEO), Stephen Elop, will step down and become the executive vice
president of Nokia's Devices & Services division. He could
also be a possible successor to Microsoft CEO, Steve Ballmer, who
announced his retirement last month.
In order to help the company gain traction in the fast-growing
mobile and cloud-computing markets, Ballmer recently announced a
series of functional and executive changes. The Nokia deal
clearly shows its commitment to turn itself into more of a
As part of the deal, Microsoft will own Nokia's devices
division, which has been a leader in creating the Lumia line of
smartphones that run on Microsoft's Windows Phone operating
system. Nokia's flagship Lumia phones are most likely the
best-selling Windows Phones today but significantly lag the
competition in popularity. Microsoft's revamped mobile OS has
been struggling in a competitive market dominated by Android and
According to a report from comScore, Microsoft's Windows
operating system holds only 3.3% market share compared to 79.0%
and 14.2% held by
) Android and
) iOS mobile platforms, respectively.
This deal brings Windows Phone 8 and its most loyal hardware
partner under the same roof, giving the company the integrated
mobile offering it's been looking for with Surface and other
devices. Its other hardware partners, including Samsung, HTC and
) will not be much affected by the deal as they are making more
money from their Android devices.
The deal will enable Microsoft to address opportunities in
what is a fast-growing mobile segment. However, shareholders are
unlikely to welcome the purchase, since Nokia's business was
making losses and Microsoft's Windows Phone OS has been far from
popular. Still, Microsoft is making the purchase dirt cheap and
also using its offshore cash, so it may be worth the gamble.
Currently, Microsoft has a Zacks Rank #3 (Hold).
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