Microsoft have agreed to buy Nokia’s mobile phone business for £4.6bn, including their patents and mapping services.
This deal is due to be completed early 2014, and since the news of the deal Nokia’s shares have risen by a staggering 45%. Nokia currently employ around 32,000 people who will all be moving over to Microsoft following the completion of the deal, of which is still subject to the approval of Nokia’s shareholders and regulators.
The deal was announced following poor performance in the mobile market from both tech giants, with Nokia struggling to compete with Samsung and Apple, and Microsoft being criticised for being too slow into the market.
Chief Executive of Microsoft, Steve Ballmer, said in a statement that ‘it’s a bold step into the future- a win-win for employees, shareholders and consumers of both companies.’
Following Microsoft’s relatively slow sales of its Surface tablet, critics have said the business has been too slow to respond to the mobile device market, meaning the business has struggled as consumers shun traditional PCs and laptops.
Managing Director of Frost & Sullivan, Manoj Menon, told BBC News ‘clearly the number one priority for the company is to get its mobile strategy right. From a strategy point of view, this deal is the perfect step; the only question is how well they can execute this plan.’
Ben Wood, an analyst at telecoms consultancy CCS Insight, said: ‘It’s a necessary gamble by Microsoft to break into mobile, but given its complete reliance on Nokia for Windows Phone devices and the competitive position of Apple and Google with rival phone platforms an understandable move.’
Nokia, a previous leader in the mobile phone market, had their sales fall by 24% in the quarter leading to June in a previous year. Last quarter a sale of 53.7 million phones saw a fall of 27%. However sales of the new Lumia, which runs a Microsoft OS, rose in the same quarter.
This sale, which ‘should help Microsoft make a more effective strategy to compete in the mobile sphere’ (Mr Menon), will also include a 10-year agreement allowing Microsoft use of the Nokia branding for existing mobile phone products, and will result in changes within the current leadership team.
Succeeding the transfer, Nokia have said that they will focus on three key businesses; network equipment manufacturing; mapping and location service; the development and licensing of technology.
Source: BBC News