Nokia's Lumia brand, which runs a version of the Windows operating system, will transfer to Microsoft (Photo: Microsoft)
Microsoft is planning to buy Nokia's mobile phone and services businesses, as the US software group makes its most aggressive move to date to broaden its business footprint.
Microsoft will pay 3.79 billion euros in cash for the Nokia operations as well as an additional 1.65 billion euros for the Finnish company's patents. Altogether, the purchase price is 5.44 billion and Microsoft said it will pay cash for the assets.
"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 CEO Steve Ballmer.
Ballmer, who plans to step down as Microsoft CEO in the next 12 months, has been criticized for relying too heavily on the group's established software business, while consumer demand has been switching strongly in the direction of mobile apps and services. For Microsoft, the Windows operating system and its Office productivity products have remained the most important products. Earlier this year, Ballmer announced a strategic reorientation of Microsoft.
Microsoft and Nokia have worked closely together since February, 2011, when the two companies announced that Nokia phones would start using Microsoft's mobile operating system. Microsoft said this week that the acquisition of the Nokia business units will help it grow its mobile business through faster innovation, increased synergies and a more unified marketing and branding.
Once the transaction closes in the first quarter of 2014, approximately 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 Nokia employees directly involved in manufacturing, assembly and packaging of products worldwide. Microsoft will get an annual sales boost of about 14.9 billion euros, which is half of Nokia's 2012 sales total.
The Nokia mobile phone business Microsoft is buying had sales of 53.7 million units in the second quarter of this year. It includes the new Lumia brand, which had sales of 7.4 million units in the quarter.
Nokia said that, following the divestment, it plans to focus on three business areas: network infrastructure and services; mapping and location services; and technology development and licensing. The sale is expected to close in the first quarter of 2014.
Microsoft also announced that it will build a new data center in Finland to service its European customers. The company plans to invest around 250 million dlrs in the center over the next few years.