Microsoft to acquire Nokia

http://www.microsoft.com/en-us/news/press/2013/Sep13/09-02AnnouncementPR.aspx

by SwaroopH • 13 years ago

395 144 13 years ago

I think this has been expected since the Nokia Windows Phone bet. I suspect that this is not unrelated to the Ballmer departure.

I'm not sure it does either company much good. If anything it looks to me like a panic move of two companies who while from te outside they seem huge and successful to many are actually seeing the writing on the wal and have no real plan for the future.

This won't make Microsoft competitive with Apple where it wants to be despite the hopes of Redmond.

cicloid• 13 years ago

With the apparent growing trend on emerging markets of Windows Phones (the Lumia series produced by Nokia, and pushed by carriers on LATAM like Telcel/America Movil)

This seems like a great move from MS, they have bought more runway.

But come on, the move was telegraphed a couple of years ago.

IanChiles2• 13 years ago

And now Microsoft has a hardware division. I can easily see most hardware vendors being ousted by the trio of Google/MS/Apple - all of whom now either make or have been making their own hardware to go along with their software. And so the walled garden grows...

spullara2• 13 years ago

They already have several hardware products including Xbox, Kinnect, keyboards, mice, and the Surface.

IanChiles2• 13 years ago

But now they're in control of a hardware vendor - one in a position to allow them to close off WP8 to other OEMs, and potentially a future version of Windows.

kabdib2• 13 years ago

With the exception of the folks doing keyboards (which they have been serially been screwing up for the last ten years) Microsoft has some very good hardware people. The Surface was a nice piece of kit, but way expensive (for unavoidable reasons, I hear) and running the wrong software (also for unavoidable reasons).

brokenparser4• 13 years ago

Right, don't mention ze Zune.

pyre• 13 years ago

We've yet to see Google do anything interesting w/ Motorola though (unless I've missed something). The Nexus line are all currently built by LG, no? So sure they own Motorola, but they haven't (tightly) integrated it into their Android plans.

SeanLuke• 13 years ago

Moto X

iamshs• 13 years ago

Exactly. This acquisition gels well with the "devices and services" narrative. It helps that Microsoft has good hardware division, and combined with Nokia I hope they find traction in Mobile market. This is a good acquisition for MS, as Nokia was already on WP. I wonder what happens to the rumored Nokia tablet now.

wfunction• 13 years ago

I hope Ballmer and Gates have a dedicated CEO in mind now that Ballmer's leaving... very few people will be able to lead a company this large, and it will be quite a tragedy if Microsoft's reputation declines and takes down Nokia with it.

magickastle• 13 years ago

I heard a rumor that Paul Graham is being courted, but it is probably disinformation.

kabdib2• 13 years ago

Microsoft could do a lot worse :-)

nosefrog• 13 years ago

I would be very surprised if either party was interested in PG being CEO of Microsoft.

untog• 13 years ago

Haha good lord no. I doubt either party would be in any way interested.

anomaly_• 13 years ago

I found this statement interesting - "Microsoft will draw upon its overseas cash resources to fund the transaction." I've seen it mentioned quite a few times that tech companies end up with massive overseas cash reserves they can't repatriate for tax reasons. Anyone with better knowledge of finance/tax want to chime in with whether this makes the deal even more attractive for MS?

tanzam759• 13 years ago

The corporate tax rate in the United States is 35%. The corporate tax rate in Ireland is 12.5%. (This is why multinationals like to incorporate their European subsidiaries in Ireland.)

If Microsoft moved money in the United States, it would pay the difference in taxes -- namely, 22.5%. But if Microsoft spent the money outside the United States, then it would not pay this difference.

Incidentally, Finland will be reducing its corporate tax rate next year, from 24.5% to 20%.

sjwright• 13 years ago

A summary of the tax arrangements used by some large American multinationals, including Microsoft, Google, Facebook, Apple, Oracle and Adobe:

http://en.wikipedia.org/wiki/Double_Irish_arrangement

As I understand it, these international profits remain in the tax-haven-resident Irish company, and cannot be repatriated to the US parent without incurring an undesirable taxation event.

It's highly likely that Finland-based Nokia is a fiscally efficient purchase for Microsoft. Both Finland and Ireland are EU countries, are in the Eurozone, and have a customs union.

(It would be interesting to compare this to Google's purchase of Motorola Mobility, which was an American company.)

Steko3• 13 years ago

Speaking of handset makers that missed the revolution, I wonder who will pick up RIM as they circle the drain. Microsoft is probably the favorite right?

tanzam759• 13 years ago

Now that Microsoft is buying Nokia, it seems unlikely that Microsoft will buy Blackberry. Unless it's a firesale for the patents.

Note: RIM changed its name to Blackberry Ltd, with a stock ticker of BBRY.

bodyfour2• 13 years ago

I'd say Blackberry is the big loser in this deal, since it probably takes one of their more plausible options off the table.

kyro3• 13 years ago

Great move by Microsoft.

This is an acquisition that arguably puts Microsoft mobile capabilities above that of Google's, and closest to Apple's. They're getting industry veterans with great design talent. They're getting a Lumia product that has the best build quality of any non-Apple smart phone. They're acquiring proven channels to access global markets. Both Nokia and Microsoft have been floundering in the mobile space recently; neither have had any real explosive successes. Together they might make some really compelling offerings.

I'm not a fan of their mobile OS, but I am a huge fan of Nokia's latest smartphones, and if Nokia design's talent can figure out how to introduce a better UI, I'd seriously consider getting The Windows Phone as my next smartphone.

Shamanmuni• 13 years ago

But they were together already. This past time Nokia only developed Windows phones and Microsoft paid for the marketing of the Lumia. Nokia had Stephen Elop as CEO, for crying out loud. We already knew Nokia was a part of Microsoft. This is not a move, just a formality; the low price gives you another hint. If the partnership Microsoft-Nokia could have changed their positions in the mobile sector, it would have happened years ago.

Nothing will change as a result of this.

kyro3• 13 years ago

It's more than that. Microsoft is acquiring the Lumia brand. This gives them the ability to bundle both hardware and software to create one simple, cohesive experience. They will no longer be pushing the Nokia Lumia with Windows Phone 8, but The Microsoft Phone. And they can now brag about how they are the smartphone with the best camera. From a marketing perspective, this makes lots of sense.

Lots of that is speculation on what I hope Microsoft does with this, namely adopting Apple's marketing simplicity and control of the user experience.

jwr• 13 years ago

Exactly. My first reaction to this news was "wait, didn't this already happen?", before I realized that it didn't quite happen, but the speculation at the time Elop joined Nokia was precisely about an acquisition.

berntb2• 13 years ago

>Nothing will change as a result of this.

A good guess is that the enthusiasm at e.g. Samsung for making Windows Phones have gone down quite a bit...

Windows Phones seems to be an internal Microsoft thing now, Xbox style.

anuragramdasan• 13 years ago

Actually I wouldn't totally agree to that. Some things will have to change. Now that Nokia is not a separate entity but a part of microsoft, it will have to fit within the microsoft way of doing things. This could probably mean more restrictions on whatever Nokia would have done as a separate entity.

joe_the_user• 13 years ago

This is an acquisition that arguably puts Microsoft mobile capabilities above that of Google's, and closest to Apple's.

To have this loltastic sentence at the top of hn makes me wonder if MS or some PR has a bunch of shill accounts they roll out for occasions like this. Seriously? As the other reply said, they were already together. And losing. Badly. And hated, broadly.

And the reason the windows phone sucks so badly is that MS tied the PC and phone UIs together into a "push-me pull-you" (Windows 8 everywhere) that can't succeed at either task. And so to escape MS will have to back out of their deal entirely, go back to designing phones and PC OSes separately, and given MS' ingrown bureaucratic insanity there that seems less than likely.

Grafting a few more limbs onto a failing Frankenstein will ... create a bigger failing Frankenstein.

orf5• 13 years ago

I take it you have never used a Windows Phone. The Lumia's Nokia make are well designed and high quality, WP8 isn't that bad at all and will undoubtedly get better in the future. Everyone I've met with a WP device (Which is a lot, a fair percentage of my coursemates own one) is happy with it.

And so to escape MS will have to back out of their deal entirely, go back to designing phones and PC OSes separately, and given MS' ingrown bureaucratic insanity there that seems less than likely.

Why would they ever want to go back to designing them separately? How would that benefit anyone in any way? In case you hadn't noticed phones are computers now, integration is the future.

harrytuttle5• 13 years ago

And here we go with the shill comments...

If someone doesn't agree with you it doesn't mean they are a shill.

This isn't Slashdot!

lnanek2• 13 years ago

I'll always be an Android user, but even I admit the current Windows Phone UI is cleaner, looks better, and is easier to use. I don't have stats, but I can certainly throw my anecdotes in that people I see get them are happy with the UI and OS, although the don't have the level of apps the other platforms have.

film42• 13 years ago

Actually, I think M$ just bought themselves a lot of power. Microsoft's achilles heel was always hardware, and Nokia's was software until recently when they started pushing Windows Phone OS.

So the way I see it, M$ just bought a hardware company that already uses M$ software. No brainer.

mbytes• 13 years ago

I agree with you. I used to have a Nokia N900 and that thing was amazing. They abandoned it and switched to a crappy windows based OS which can't do half as many things as the N900 could and also had the potential to. I think they should have continued developing their Maemo OS, it was the best phone OS I ever used.

rbanffy9• 13 years ago

This is an acquisition that arguably puts Microsoft mobile capabilities above that of Google's, and closest to Apple's.

Man.. What have you been smoking?

They're getting industry veterans with great design talent

Who consistently failed to exceed 3% of market share.

They're acquiring proven channels to access global markets.

Very low-margin markets.

Both Nokia and Microsoft have been floundering in the mobile space recently; neither have had any real explosive successes. Together they might make some really compelling offerings.

According to your logic, two bricks tied together float better than one.

Jare• 13 years ago

According to your logic, two bricks tied together float better than one.

A sail doesn't float and a hull doesn't move, but together they can make great boats

mindprince• 13 years ago

I found Microsoft's strategic rationale for this deal interesting: http://www.microsoft.com/en-us/news/download/press/2013/Stra...

cpeterso• 13 years ago

The press release says Microsoft will acquire Nokia’s Devices & Services business and license Nokia’s patents and mapping services. So what happens to the rest of Nokia?

tanzam759• 13 years ago

So what happens to the rest of Nokia?

Nokia keeps the other two divisions.

Nokia is now primarily a telecoms infrastructure company, like Alcatel-Lucent. They're pretty closely matched. Alcatel-Lucent had €14.4 billion of revenues in 2012, while Nokia Siemens Networks took in €13.1 billion of revenues.

There's also the mapping division, but that's just 10% of the new Nokia's revenues. I'm surprised Microsoft did not buy it, as Google and Apple both own their own maps. In fact, I wonder if the mapping division wasn't what scuttled the previous attempts to reach a deal.

tincholio• 13 years ago

Nokia Siemens Networks

NSN is no longer Nokia Siemens Networks; it's Nokia Solutions and Networks now, and Siemens is no longer part of it.

gph• 13 years ago

"Its device business now gone, Nokia's plan is to focus on three core technologies: NSN (its network infrastructure) HERE (its maps and location-based services); and Advanced Technologies (a licensing and development arm)."[1]

It'll still exist. Most of the top executives are moving to Microsoft as part of the deal though.

I am curious if this deal required shareholder consent of any type. I'm sure the board had to approve. Still I don't know how I'd feel if I was holding onto a decent chunk of Nokia stock right now and I didn't get any say in selling out our core business.

[1]http://www.theverge.com/2013/9/2/4688530/microsoft-buys-noki...

villek• 13 years ago

"The transaction is expected to close in the first quarter of 2014, subject to approval by Nokia’s shareholders, regulatory approvals and other closing conditions."

So yes, it will require consent from Nokia shareholders.

hpaavola• 13 years ago

Nokia bought Siemens part of Nokia Siemens Networks earlier this year. That will be their focus onwards. Ericsson did the same many years ago (when Nokia started to dominate the mobile phone business) and is now the biggest networking company.

general_failure• 13 years ago

So, is there any Nokia left after all this?

tanzam759• 13 years ago

So, is there any Nokia left after all this?

Yes, it leaves Nokia Siemens Networks and HERE Maps.

Last quarter, NSN accounted for 49% of Nokia revenues, and 108% of operating profit. (Not a typo -- the phone division lost money.) HERE Maps is insignificant, but for some reason Nokia wanted to hang on to it.

So, Nokia now has a slightly increased operating profit, plus an extra €5.4 billion from Microsoft. According to the press release, when you subtract out the purchase price for the "S" half of NSN, Nokia has €7.8 billion in net cash. For a company that closed yesterday at a market cap of €11 billion.

ChuckMcM• 13 years ago

Wow, I can't say I'm completely surprised but still. It is an amazing thing. It has to be pretty scary these days to be a phone maker.

test001only• 13 years ago

What would this mean for all the Nokia feature phones ? The latest Asha series was very good and selling pretty well at least in India. How would this figure in MS strategy? Are they going to ditch it? That would be sad, because Nokia still makes phones that can withstand rough use. On the other side would Nokia start manufacturing Laptop in future. I would really like Nokia design team to come up with a good Windows laptop!

apike• 13 years ago

One of Microsoft's documents about the acquisition calls out that it is getting the Asha brand and a 10-year license to the Nokia brand for feature phones, so I expect that line will stay for now.

abrowne• 13 years ago

I wonder if the Asha design will go from Meego-like with Nokia squircles to a Metro-like square theme? I personally love my Asha 501, but wouldn't want a WP8-light version.

Also, will they "upgrade" Nokia Xpress's (proxy browser) backend to use the IE engine in place of Gecko?

simula67• 13 years ago

Slightly off-topic : For hackers outside the USA/EU I think Microsoft succeeding can be a bad thing since Macs are really expensive here and Microsoft silently allowing piracy means that everyone uses Windows. I feel that ISVs better supporting Linux would be a nice thing and one of the important things to happen for that is for Windows to loose its monopoly ( second is of course some sort of agreement between all Linux distros around some standard ). I can't but feel that is to be a distant dream, since Microsoft seems to have infinite pockets and can buy their way out of any trouble for years to come.

yalogin• 13 years ago

Motorola and now Nokia, the last of the previous era big wigs have fallen. 13 years ago Lucent, Motorola, Ericsson, Sun, Nortel were huge. Now they are all gone. Even HP, Dell are no longer leading. That is a really short time span for a company to be on top of the world and disappear. Is this the expected life span of a tech company?

foobarbazqux• 13 years ago

13 years ago was the dot-com bubble. What about Microsoft, IBM, Apple, Intel, Oracle?

brokenparser4• 13 years ago

IBM doesn't count because that company is almost as old as the invention of the computer itself.

besquared• 13 years ago

Specialized hardware was always kind of a stopgap. Even now you can see networking companies facing the double threat of virtualized networking in software. Software is eating the world as Andreessen famously stated.

As to the life span of tech companies I think it will only get shorter. One thing I find interesting is that it's difficult for humans (including myself) to really internalize the overall effects of compounding interest. I read a comment the other day in which the author was joking about how they can't wait until 2023 when they get to look back and feel how they do now looking back at 2003. It doesn't always seem that the speed at which things are happening is increasing dramatically even if that's the case. The progress between 2003 until now will be completely overwhelmed just a few years from today.

gtirloni5• 13 years ago

We might not be enjoying that much growth in the next century (or we might, who knows).

http://blog.ted.com/2013/04/23/the-future-of-work-and-innova...

microtonal2• 13 years ago

Motorola and now Nokia, the last of the previous era big wigs have fallen.

Actually, Nokia was slowly and steadily on a rebound in the markets where they were traditionally strong. E.g. market shares of Windows Phone in the five largest European economies has grown from 4.9% a year ago to 8.2% now [1]. That's almost half the marketshare of iOS (17.3%).

Most of those units were Nokia Lumias.

Sure, it's not where they were years ago percentage-wise, but the smartphone market has grown enormously since then, and WP is showing good growth (except in the US).

Source: http://www.nu.nl/tech/3565096/windows-phone-groeit-nieuwe-sm...

whattssonn• 13 years ago

Are those WP's in the hands of customers or still in the sales chanel? I suspect the last, and i do not trust those numbers. It's MS after all. If you don't know what i mean with that last sentence then learn the "classics" first.

Btw, nu.nl is not a source, really not a source. Tweakers.net is also not a source, too biased (i know you didn't mention tweakers, just sayin').

Sent from my iPad

mhartl• 13 years ago

Nokia started in 1865 as a pulp mill and paper manufacturer.

josephscott• 13 years ago

I wonder if this played into Ballmer leaving. Odd to have a massive re-org and massive purchase, only to have the CEO turn around and leave right afterwards.

nextw33k2• 13 years ago

The timing of this is completely laid out. It looks too perfect and these deals take time to arrange and agree, they are not done in a week.

annnnd• 13 years ago

Nokia, rest in peace - we will miss you. Your phones were legendary.

berntb2• 13 years ago

Hear hear.

A black T-shirt today. :-(

harrytuttle5• 13 years ago

Erm, they still are and will be in the future.

they bagged the guys who designed them as well.

nextw33k2• 13 years ago

You might be unfamiliar with what happens after a corporate merger.

Usually there is a decision to remove duplication within the corporation. If you were Elop next year running MS in Redmond, who would you lay off? The people in your building or those in the opposite side of the world in Finland?

Update: On a side note, manufacturing usually stays until the machines are no longer worth using. Then they shut the place down claiming inefficiencies and build a new factory somewhere else. They don't mention the lack of investment for 10 years of course.

trailfox2• 13 years ago

Sad to see Nokia going the way of the dodo.

devx• 13 years ago

Seems like Elop stayed true to his nickname - of a trojan horse. He never really worked for Nokia. He's been working for Microsoft the whole time, just to sell it for this low price.

How the hell are the shareholders okay with this? I'm shocked it sold for under $10 billion. Nokia's total valuation is about 15 billion, and you'd have to imagine they'd have to pay a 30 percent premium when buying it, so that's $20 billion for the whole. I assume the devices division was worth at least half of that. Didn't Nokia already sell the telecom part?

auctiontheory• 13 years ago

Presumably Nokia's management thought they were getting a good deal for the devices business, since its long-term value to Nokia seems to be approaching zero.

Now if you ask: was Windows Mobile all a plot to blow up Nokia? That's an interesting question. I can't confirm that.

tluyben2• 13 years ago

That's what I thought when Elop went to Nokia and even in hindsight it seems to be the case. As a share holder, I definitely would ask questions. It seems hard to prove though; their market was falling anyway, but there are a lot of what ifs: like if they would've done Android, continued with their own OS but made it really open etc.

trailfox2• 13 years ago

Seems like Elop stayed true to his nickname - of a trojan horse.

Wonder if it was intentional to run Nokia into the ground or just sheer incompetence?

discodave• 13 years ago

Remember Hanlons razor...

pasiaj• 13 years ago

There is a running joke about the irony of the board chairman Siilasmaa of F-Secure letting in a Trojan Horse.

http://fi.wikipedia.org/wiki/Risto_Siilasmaa

ximeng• 13 years ago

Annual cost synergies of 600MM within 18 months - sounds like they plan to kill 3000 jobs.

http://www.microsoft.com/en-us/news/download/press/2013/Stra... (page 21)

jcrei• 13 years ago

The old fat couple in the room had a dance and #microsoft just ran out of things to say, so in order to avoid an awkward moment (high end sales are abysmal) he proposed. #nokia looked around, didn't want to die alone, and like any scared middle aged woman, said yes.

simonh4• 13 years ago

This is the ultimate indictment of Steve Ballmer's "I like our strategy, I like it a lot" statement. This is the final admission that their strategy of licensing a mobile OS to phone manufacturers, just as they licensed desktop Windows to PC makers, has completely failed. This must have been in the works for months, so now finally the other shoe has dropped and we know why he had to leave. There's no way he could save face over something like this.

Just to be clear, the strategy itself wasn't the problem, just look at Android, the problem was that technically their product was technically deficient. They failed to execute the strategy effectively. What I have always wondered is whether this was simply due to hardware limitations of the day, or whether the old Windows Mobile was deliberately held back technically to prevent it competing with Desktop Windows. If the former then Microsoft just suffered from a form of first mover's disadvantage, and a lack of foresight. If the latter then they richly deserve all the failure they've reaped. I'd love to know.

wtracy• 13 years ago

Well, it's possible that the model of selling an OS to phone manufacturers has been destroyed by Google giving an OS to manufacturers as a loss-leader.

simonh4• 13 years ago

There's nothing inevitable about that though. It only works if the freebie is sufficiently attractive. For example being free hasn't helped Linux succeed on the desktop, despite it's strong position in the server space.

rbanffy9• 13 years ago

This must have been in the works for months

This thing started before Elop left Microsoft. They have perfected executive outplacement as an offensive weapon.

simonh4• 13 years ago

An amusing thought, but if Microsoft was that effective at executing covert strategic initiatives, you'd think that would cross over into their public strategic capability. Sadly the evidence of events over the last few years doesn't bear that out.

peterjs• 13 years ago

Software is eating the world. For real now. And it is eating hardware. This is such a strong force that even old time franchises like Microsoft and Motorola can't do anything about it. And apparently "pure software" companies don't mind venturing into it. They know it's software, for the most part, and believe vertical integration is worth the trouble with the messy hardware parts.

How deep is the integration anyway? Did Google and Microsoft end up owning the manufacturing plants? Apple is known to outsource the manufacturing itself.

thewarrior• 13 years ago

Microsoft has destroyed companies before :

See : http://www.theregister.co.uk/2009/09/09/microsoft_destroyed_...

timdellinger• 13 years ago

"Microsoft will draw upon its overseas cash resources to fund the transaction."

This is an important aspect of the deal - bringing money earned overseas into the US is often costly (taxes, etc.). As a result, US companies often end up with cash sitting overseas with nothing to spend it on, and are hesitant to take the hit that happens when they bring it to the US... so this is a great way for Microsoft to use that money in an effective way.

According to this article, Microsoft has $60 Billion sitting offshore in order to avoid US taxes: http://www.forbes.com/sites/connieguglielmo/2013/08/01/apple...

nickff• 13 years ago

Microsoft also used offshore money to buy Skype.

hga2• 13 years ago

Key graff: "The average tax rate these companies currently pay to other countries on this income is just 6.9 percent, well below lower the 35 percent statutory U.S. corporate tax rate."

As I recall we (the US) have the highest corporate income taxes in the developed world. It would be a gross dereliction of management's duty to shareholders to repatriate it unless really needed.

dvmmh• 13 years ago

No corporation pays 35%. There are far too many loop holes. The US has the highest rates ON THE BOOKS if you take ZERO deductions and write-offs.

http://thinkprogress.org/economy/2013/04/01/1804801/no-ameri...

sravfeyn• 13 years ago

This news may sound exciting/disappointing to the developed countries, but it is certainly extremely disappointing for people in third-world countries, especially India.

It is not at all hyperbole to say 'Nokia played a key role in India's mobile penetration'. They sell affordable, reliable and rigid phones for rough use in rural places of India. And I think it's true for most other countries like Africa. On the other hand Microsoft mostly makes premium software and hardware. I don't know any affordable tool(w.r.t developing countries) from Microsoft. This may put Microsoft in a better position in terms of smartphone. But in other terms this may be a step towards 'diminishing power of poor people'.

vshade• 13 years ago

On the other hand, the low end lumias are more usable than most of same priced android phones in Brazil, I know that here and parts of africa is the way the market is going. I hope they don't stop serving this market.

avemuri• 13 years ago

The low end android sets made by Micromax, Lava etc. are priced very affordably (Rs3000-5000/$50-80). And the market is still flooded with even cheaper feature phones. I don't see how the power of poor people is diminished.

gtirloni5• 13 years ago

Motorola is building featurephones until this day. Lots of them. Nokia is not going to abandon that market (India's) anytime soon while they are selling there. I would not worry about it too much.

Microsoft to acquire Nokia

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