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Microsoft to buy Nokia’s Devices & Services business

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In a major and unexpected move, Nokia has announced that Microsoft will acquire its Devices & Services business. Microsoft will also license Nokia’s patents and license and use Nokia’s mapping services.

The dual press release from Microsoft and Nokia reveals that Microsoft to buy Nokia will spend a total of 5.44 billion euros in cash, or $7.17 billion on the deal. That includes $4.99 billion for the business and another $2.18 billion for Nokia’s patent licenses. The deal is expected to close in the first quarter of 2014, pending approval of Nokia’s shareholders, regulatory approvals and other closing conditions.

The press release says that when and if the deal is closed, about 32,000 of Nokia’s employees will become Microsoft team members, including 4,700 people in Nokia’s home in Finland. Microsoft will now acquire the Lumia brand of smartphones that were already using Microsoft’s Windows Phone operating system. Nokia first announced that it would use the Windows Phone OS back in February 2011.

Microsoft will also take charge of Nokia’s Mobile Phones business unit and its budget priced Asha lineup of smartphones, but will license the Nokia brand to sell those phones. Nokia will continue to own and manage the Nokia brand.

As far as the patents deal, Microsoft has been granted a 10 year agreement to use Nokia’ patents, along with another four year deal to use Nokia’s HERE mapping services. Nokia will also get the rights to use Microsoft’s patents for its HERE services.

Current Nokia President and CEO Stephen Elop will resign immediately from his position and become the company’s Executive Vice President, Devices & Services. Nokia’s current chairman of its board of directors Risto Siilasmaa will take over as interim CEO. Elop and other members of Nokia’s leadership are expected to become team members of Microsoft when the deal is closed.

Nokia CEO Stephen Elop will return to Microsoft as part of the sale of Nokia's devices unit to the Windows maker

Nokia CEO Stephen Elop will return to Microsoft as part of the sale of Nokia’s devices unit to the Windows maker

As part of Microsoft’s impending acquisition of Nokia’s devices and services unit, current Nokia CEO and former Microsoft executive Stephen Elop is returning to the company where he once led development of Microsoft Office.

Microsoft’s press release announcing the purchase notes that Elop will now serve as Nokia’s executive vice president of its devices and services division, the portion of Nokia that Microsoft will acquire through the deal. According to an email sent to Microsoft employees by CEO Steve Ballmer, Elop will lead the Microsoft’s devices team when the transaction is complete, including all of Microsoft’s current devices and studios as well as the majority of the teams being acquired from Nokia.

Ballmer’s memo states Julie Larson-Green, recently named the head of Microsoft’s hardware products, will “be joining Stephen’s team once the acquisition closes,” though she will focus on the release of Microsoft’s Xbox One game console and upcoming “Surface enhancements” until then. The move marks the third in about a year for Larson-Green, who oversaw Windows development following Steven Sinofsky’s departure in November.

A separate press release issued by Nokia states Risto Siilasmaa, current chairman of Nokia’s board of directors, will serve as the company’s interim chief executive. Elop will directly report to Siilasmaa until the deal is finalized, which is expected to occur in the first quarter of 2014. In addition to relinquishing his responsibilities as president and CEO, Elop also resigned from Nokia’s board of directors, effective immediately.

Elop’s return to Microsoft comes on the heels of speculation that he could be a candidate to become the company’s chief executive when Ballmer retires in a year or less. Microsoft has given no indication of what qualities it’s seeking in a new chief executive, however, and equal speculation exists that the company will seek an outside candidate instead of any internal options. Elop left Microsoft in 2010 to become Nokia’s chief executive.

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