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Microsoft buys Nokia, takes direct control of Windows Phone

News by Andrew Kameka on Tuesday September 03, 2013.

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Microsoft paid Nokia millions of dollars in "support" payments in the early days of the Finnish manufacturer's transition to Windows Phone, but Microsoft today announced it will pay EUR 5.44 billion (US $7.17 billion) to acquire Nokia's Devices & Services division. The move has been expected for quite some time, especially after Microsoft began directly competing with its Windows RT licensees with the release of it Surface tablet. Today's purchase grants Microsoft a treasure chest of patents, 32,000 employees, and a turnkey handset business to sell and market phones. Microsoft is now in the smartphone business.

Nokia and Microsoft have had deep ties since Nokia CEO Stephen Elop decided to abandon Symbian and move towards Windows Phone. The decision did not lead to massive success for Nokia, but the company did manage to gobble up the vast majority of the Windows Phone market share. Microsoft will now be directly responsible for and in control of the lion share of Windows Phone - 8 of every 10 - handsets sold each year. That might cause some Windows Phone licensees like HTC and Samsung to be nervous about having to compete with the company directly responsible for the software it uses, something also facing Android licensees competing with Google-owned Motorola. The difference here is that Samsung is actually the leading smartphone player in the Android game, but Microsoft has become both the source and the dominant seller in Windows Phone software.

As for what happens next for Windows Phone and Nokia, the two companies have issued statements detailing how they plan to move forward.

Does Microsoft own all of Nokia?

No, Microsoft has purchased only the Devices & Services business, which includes the design team, sales, and marketing staff. Nokia will retain its units that deal with network infrastructure, HERE Maps and location, and Advanced Technologies for research and licensing. Microsoft will gain a 10-year exclusive license to Nokia's patent library and may extend the deal when it expires.

What happens to my phone?

Nothing changes - yet. Nokia and Microsoft don't expect the deal to close until the first quarter of 2014. Until that happens, it's business as usual at Nokia. The company will continue to sell phones and fulfill its obligation to current customers and support issues. What happens beyond that has yet to be determined. Considering that Nokia is practically synonymous with Windows Phone, current Lumia owners can expect to receive the same amount of attention if not more once Seattle takes control.

What about non-Nokia Windows Phone handsets?

Microsoft will continue to licenses Windows Phone to other companies, so Samsung is free to sell more ATIV handsets and HTC can continue to sell its Windows Phone devices.

How much is the deal worth, and what happens to HERE?

Microsoft will pay 5.44 billion euros, of which 3.79 billion (US $4.99 billion) is for the handset division and 1.65 billion (US $2.17 billion) is for the patent deal. Nokia retains ownership of HERE Maps and will continue to receive separate payments from Microsoft for the company's license of the technology.

So, Nokia phones are pretty much dead?

Not entirely. Microsoft has granted Nokia a 10-year agreement to use the Nokia brand on current mobile phones and Nokia retains ownership of the brand. Microsoft bought only the handset division and the Lumia brand. However, Nokia remains in control of the Nokia brand and will continue to sell S30 and S40 feature phones. Nokia will not be able to use the brand to sell phones after the December 31, 2015.

So, definitely no Android Lumias now, huh?

Obviously. Sorry.

Who's running the show?

Nokia CEO Stephen Elop has given up his role as head of the company to avoid any appearance of a potential conflict of interest while the deal closes. (He may be in the running to become a future Microsoft CEO to replace the retiring Steve Ballmer). Elop has become EVP of Devices and Services and will report to Nokia Chairman and interim CEO Risto Siilasmaa.

source: Nokia

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About the author

Andrew Kameka
Andrew is based in Miami, Florida.

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