After partnering up with Microsoft early in 2011 to have Windows Phone as its sole smartphone platform of choice, Nokia has now gone one step further by selling its mobile division to the Redmond based software giant.  

Microsoft and Nokia have announced that the Boards of Directors for both companies have decided to enter into a transaction, whereby Redmond will purchase Nokia’s Devices and Services business, which is responsible for making smartphones, Asha feature phones and reportedly tablets as well in the near future.

This deal is worth €3.79 billion (around R51.35 billion) and in addition, Microsoft will also license Nokia’s patents for another €1.65 billion (about R22.35 billion), for a grand total of €5.44 billion (approximately R73.71 billion). This transaction is expected to close during Q1 2014. Microsoft will also become a strategic licensee of the Nokia’s HERE location and mapping platform, paying Nokia separately for a four year license to use this service.

Corporate fallout emanating from the deal

When this transaction closes around 32 000 Nokia employees will be transferred to Microsoft including approximately 4700 workers in Finland. Redmond plans on accelerating the growth of its share and profit in mobile devices by way of “faster innovation, increased synergies, and unified branding and marketing.”

As a result of this announcement, Stephen Elop is stepping down as Nokia president and CEO and will now take on the role of Nokia executive VP of Devices and Services. Nokia's chief technology office as well as its patent portfolio will remain within the Nokia Group.

“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,” said Microsoft CEO Steve Ballmer.

Espoo’s new corporate focus will be NSN (Nokia Solutions Networks formerly Nokia Siemens Networks), the HERE location and mapping business unit, and Advanced Technologies, which is a technology development and licensing division.

To the point

The deal is more concrete proof of Microsoft’s significant transition from a software company to a devices and services firm, which makes gaming consoles and now smartphones as well.

Ballmer himself seems certain that the move 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.”

Steven Ambrose, CEO of local business technology consultancy, Strategy Worx, notes another interesting point. “Microsoft’s biggest challenge was that it did not have any real depth or expertise in supply chain management and distribution. Acquiring Nokia’s mobile phone business changes this and gives them access to Nokia’s mobile network operators’ relationships across the globe,” Ambrose said.

In related news, Microsoft’s CEO Steve Ballmer recently announced his impending retirement from the company, which will take place within a year after the appointment of his successor.