Microsoft and Nokia announced yesterday that they have decided to enter into a transaction whereby Microsoft will purchase substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services.
Building on the partnership with Nokia announced two years ago Microsoft “aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing”.
Nokia, once the world’s dominant handset maker, has failed to close a growing lead opened up by Apple and Samsung in the competitive smartphone market and will now concentrate on its networking equipment unit, navigation business and technology patents.
Nokia’s head Canadian Stephen Elop, who ran Microsoft’s business software division before jumping to Nokia in 2010, will return to the U.S. firm as head of its mobile devices business. Elop is being discussed as a possible replacement for Microsoft’s retiring CEO Steve Ballmer.
“It’s very clear to me that rationally this is the right step going forward,” Elop told reporters, though he added he also felt “a great deal of sadness” over the outcome.
“I feel sadness because inevitably we are changing Nokia and what it stands for,” he said. In three years under Elop, Nokia saw its market share collapse and its share price shrivel.
In 2011, after writing a memo that said Nokia lacked the in-house technology and needed to jump off a “burning platform”, Elop made the controversial decision to use Microsoft’s Windows Phone for smartphones, rather than Nokia’s own software or Google’s Android operating system.
Nokia, which had 40 percent of the handset market in 2007, now has just 15 percent, and only 3 percent in smartphones.