Microsoft acquires Nokia for $7.2 billion: What are the implications?

Microsoft is set to acquire Nokia's Devices & Services division for $7.2 billion, which basically means that it will purchase "substantially all" of the Finnish company's business, including the popular Lumia brand.

Microsoft will also "license and use Nokia's mapping services." The Redmond giant will pay nearly $5 billion to purchase most of Nokia's Devices & Services business and an additional $2.2 billion to license Nokia's patents. In total, the deal is worth $7.2 billion in cash.

"It's a bold step into the future - a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together 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," said Microsoft's CEO Steve Ballmer. "In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution."

Per the terms of the deal, Nokia will grant Microsoft a non-exclusive license to its patents for a period of 10 years. Nokia will also assign its long-term patent licensing agreement with Qualcomm to Microsoft as part of the transaction. Microsoft, on the other hand, will give the Finnish company, which is synonymous with the popular WP8-powered Lumia smartphones, "reciprocal rights" to use Microsoft's patents in its HERE services.

"For Nokia, this is an important moment of reinvention and from a position of financial strength, we can built our next chapter," noted Risto Siilasma, Chairman of the Nokia Board of Directors and, starting now, Nokia interim CEO. "After a thorough assessment of how to maximize shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders. Additionally, the deal offers future opportunities for many Nokia employees as part of a company with the strategy, financial resources and determination to succeed in the mobile space."

The transaction, however, is currently pending regulatory approvals, as well as sanction from Nokia's shareholders and other closing conditions. However, it is expected to close in Q4 2014

As part of this deal, approximately 32,000 people, including Stephen Elop are expected to shift to Microsoft (4,700 employees in Finland and about 18,300 people worldwide). 

Nokia's CEO Stephen Elop is expected to resign from his current position and become EVP of the Microsoft Devices & Services division, whereas Nokia's Risto Siilasmaa will become the acting CEO for the company while Nokia looks for a permanent replacement.

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