Microsoft will Pay $7 Billion for Purchasing a Major Part of Nokia

Sara Cunningham September 3, 2013 0


Microsoft has made a deal to acquire a large part of Nokia for $7.18 billion. Lots of people say that this is a desperate move by this company in order to bring back the struggling cellphone company on the right track. The goal is to catch up with the companies that dominate the market like Apple Inc. and Samsung Co. This purchase could be meaningful for the tech world because when two companies are joining forces great things can happen – or not. Nokia and Microsoft have been collaborating until this purchase but now they will be operating like one.

This deal comes after CEO Steve Ballmer, who replaced Bill Gates for this job, announced its retirement. As a part of this purchase, Microsoft will take 32,000 employees of Nokia alongside its CEO Stephen Elop. Mr. Elop is one of the biggest contenders for Ballmer’s replacement as a Microsoft CEO. According to the all calculations, Microsoft is about to pay €3.79 billion to buy the Nokia mobile business including its all smartphone operations. To get to the total sum of this purchase, Microsoft will pay additional €1.65 billion for Nokia’s patents. The total deal will cost €5.44 billion which is equal to $7.18 billon.

This deal means Microsoft needed a stronger mind in the mobile-phone industry where they will try to bring themselves closer to Apple and Google. Ballmer’s successor needs to know that this industry is the biggest goal where he needs to tackle. For Nokia, this deal is like signing a capitulation after a big war with the leaders and accepting that they can’t overtake Samsung and Apple all by themselves. Nokia’s CEO has been dealing with costs of this company for the past three years since Nokia agreed to attach itself to Microsoft’s mobile OS. We concluded that Nokia’s sales weren’t going so well after Mr. Elop announced that Nokia’s expenditures for the phone business will be cut in half by the end of 2013.

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After this news about the purchase, Nokia said they are expecting this deal to improve their financial status and place strong basis for the future.

Meanwhile in Microsoft’s headquarters, they expect the deal to bring the mobile market share to an upper level and make huge profits from their mobile devices. According to Mr. Ballmer’s words, this deal is a result of a great partnership with Nokia. He added, Nokia and Microsoft already worked really close together and Nokia’s integration with the company will be smoothly completed.

According to Mr. Siilasmaa, Nokia’s Chairman, the board has met 50 times to discuss this deal. For Mr. Ballmer, this was high priority all the time. The deal was sparked when Mr. Ballmer called Mr. Siilasmaa over a phone in Barcelona back in February. Microsoft’s CEO wanted to know if there is a possibility the company to be more than a partner to Nokia. Since then, both companies have been searching for a way to involve Nokia in Microsoft’s plans.

When this transaction is done, Mr. Elop will be in charge of the computing business for the mobile devices but this time, in Microsoft. When Mr. Elop was asked if he is the main candidate for Mr. Ballmer’s CEO job, he said: “You shouldn’t read too much into it”. Majority of the analysts around the world already sees Mr. Elop as the next CEO of Microsoft. There is still time and he needs to show that he is the right person for the job.

Could Nokia and Microsoft succeed in their plans to take on the mobile industry leaders? I think this is the start of a nice collaboration.

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