14 DAY TRIAL // Microsoft and Nokia have just announced they have reached an agreement to enter into a transaction whereby the Redmond-based company will acquire the Finnish company’s Devices & Services business.
Under agreement, Microsoft will pay €3.79 billion ($5 billion) for Nokia’s Mobile & Smart Devices and Services division, as well as €1.65 billion ($2.17 billion) for the handset maker’s patents.
The terms of the transaction include a total amount of €5.44 billion ($7.17 billion) in cash that Microsoft has to pay in order to successfully close the deal in early 2014.
Nokia also confirmed that its long-term patent licensing agreement with Qualcomm would be assigned to Microsoft.
According to the agreement, the Finnish company will retain its patent portfolio and will continue to own and manage the Nokia brand, but will grant Microsoft a 10-year license to its patents at the time of the closing. The mutual patent agreement can be extended if Microsoft wishes so after the initial 10-year agreement.
Both companies agreed to exchange rights to use Microsoft and Nokia patents in HERE services. Microsoft also stated it would separately pay the Finnish handset maker for a four-year license in order to become a “strategic licensee of the HERE platform.”
Although Nokia and Windows Phone acquired quite a large market share lately, the Finnish company still needs financing in order to sustain its mobile division.
This is probably the main reason Microsoft decided to immediately make available to Nokia €1.5 billion ($1.97 billion) in the form of three €500 million ($660 million) tranches of convertible notes.
As part of the deal, Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber would transfer to Microsoft as soon as the transaction closes. Nokia’s new interim CEO will be Risto Siilasmaa, former CEO of F-Secure Corporation and current Nokia Chairman.
Last but not least, Microsoft will open a new data center in Finland, which is meant to serve Microsoft customers in Europe. More details on the deal will be announced on November 19 when Nokia plans to hold an Extraordinary General Meeting.