Microsoft buys Nokia's phone division as Steve Ballmer plans his exit

Nokia expects Microsoft to finally take control of its devices division on April 25th, the company announced today. The $7.2 billion deal — first announced in September of last year — will see Nokia sell "substantially all of its Devices and Services business to Microsoft." Nokia's latest update says that "certain customary closing conditions" are all that stands in the way of the acquisition being finalized. That suggests antitrust authorities in Asia have signed off on the deal after holding things up last month, forcing Microsoft and Nokia to push back their estimated closing date.

"This acquisition will help Microsoft accelerate innovation and market adoption for Windows Phones," Microsoft said in a statement. Several changes have been made since the acquisition was first proposed, however. Microsoft has agreed to oversee and manage Nokia.com and all of the company's social media sites for at least one year. A Korean manufacturing facility that was included in the original deal will no longer be acquired by Microsoft. The big buy was announced while Steve Ballmer was still Microsoft's chief executive.

Nokia and Microsoft have announced that their $7.2 billion buyout deal won't be closing this month after all. The Finnish smartphone manufacturer now expects to complete the sale of its devices and services divisions to Microsoft by the end of April, rather than the end of March insisted upon as recently as last month.

Nokia says it's still waiting on regulatory approval from antitrust authorities in Asia; the deal has already received the green light from the US Justice Department and the European Commission. Once the buyout goes through, Microsoft will use its new acquisition to design its own smartphones, rather than relying on Nokia to produce its flagship Windows Phone handsets as a third party.

It's been almost six months since Microsoft announced its intention to purchase Nokia for $7.2 billion, and today the phone manufacturer reiterated its intention to have the sale complete before this quarter ends. In a press release today, Nokia stressed that an ongoing tax dispute in India over one of the company's factories wouldn't affect the closing of Microsoft's intended purchase.

This statement of confidence comes just a few days after it was revealed that Nokia was petitioning the Indian Supreme Court to reverse a ruling that was initially expected to complicate the deal — however, Nokia has been quick to reiterate that the deal is not in any danger of slipping beyond Q1. Given the statements from new Microsoft CEO Satya Nadella about the importance of mobile going forward, we imagine both companies are eager to get this deal closed as soon as possible without any interference. Nokia's full statement is below:

With Microsoft's Nokia acquisition raising questions over the future of third-party Windows Phone devices, Redmond has its work cut out convincing OEMs to continue to license its struggling software — and a report from Bloomberg News suggests that the software giant may have gone to extremes. According to the report, Microsoft last month asked HTC to install Windows Phone as a "separate option" on Android handsets, and offered to "cut or eliminate" the license fee as an incentive.

Microsoft appears to be sticking with its strategy of licensing software to other manufacturers, even though it will soon produce its own smartphones. Outgoing CEO Steve Ballmer reportedly visited China last week in an effort to court new third-party hardware partners; HTC, which just posted its first ever quarterly loss, is said to have no plans for future Windows Phone devices.

The topic of CEO compensation is a thorny one around the world, but it's of most pressing interest in Finland right now, where an entire nation is reeling from the loss of its most iconic business. Many in the country, including its prime minister, find it unconscionable that Stephen Elop — the Canadian boss who led Nokia right up until the sale of its phone division to Microsoft earlier this month — is receiving a final payout of $25 million for his efforts. The sale in itself, rightly or wrongly, is perceived as a betrayal by Elop, so the lump sum payment he's now entitled to feels like adding insult to injury.

Cognizant of that precarious situation, Nokia has apparently urged its outgoing CEO to accept a reduced compensation package and thereby mollify the unhappy Finns. That's the latest word from Helsingin Sanomat, the same paper that yesterday identified specific incentives in Elop's contract for selling off Nokia's handset business. The reason we haven't, and likely won't, see Stephen Elop making that gesture of goodwill is cited as being an issue with his upcoming divorce — Elop's reasoning, according to Helsingin Sanomat, is that he wouldn't be able to convince his wife to take a smaller settlement if he accepts less than the full $25 million from Nokia.

Earlier this month Microsoft announced that it would be buying the phone division of Nokia for $7.2 billion. A leadership shuffle at Nokia was part of that, with the company's now-former CEO Stephen Elop heading to Redmond after the close of the deal — and as The New York Times points out he'll be making more than $25 million for taking the leap.

Elop stepped down as CEO and president of Nokia for a role as executive vice-president, but he'll be staying with the company until the deal itself finally closes. His contract with Nokia guaranteed him slightly different payouts depending on the circumstances of his departure from the company. An amended version of that agreement now entitles him to the same compensation whether he ends his employment contract with Nokia after the Microsoft acquisition closes, or if Nokia terminates his contract before that date. In both cases, he'll receive 18 months of his base salary along with various benefits and stock. The precise value won't be calculated until his departure actually occurs, but calculated using Nokia's closing stock price as of September 6th it comes out to a total of €18.8 million (about $25.4 million), including €4.1 million (around $5.5 million) in salary and incentives, and a whopping €14.6 million (around $19.8 million) in stock awards. Microsoft will cover about 70 percent of the payout, with Nokia handling the remaining amount.

Before Nokia bet its smartphone ambitions on Windows Phone, the idea of an Android-powered Nokia device was not so hard to believe. Now, according to a new report from The New York Times, it turns out Nokia engineers did develop Lumia phones that ran Google's Android operating system. The report, which cites people familiar with the matter, says that Android was running on Nokia smartphones internally "well before" discussions that led to Microsoft's purchase of the company's handset division, which suggests that such efforts may have taken place in 2012 or early 2013. Additionally, it's said that while Microsoft knew about the project — and confirmed its existence to the Times —it "wasn’t a part of Microsoft’s discussions" prior to the acquisition. Still, the threat of Nokia abandoning Windows Phone (a move that it was free to make at the end of 2014) for Android would have been devastating for Microsoft's struggling mobile operating system, as Nokia makes the vast majority of devices that run the OS.

Critics have long questioned Nokia's 2011 decision to partner with Microsoft and become primarily a manufacturer of Windows Phone devices. Former CEO Steven Elop has said as early as this past summer that he was "very happy with the decision we made," explaining that the company decided to avoid Google's operating system because there was a "very high risk that one hardware manufacturer could come to dominate Android." Samsung is now the dominant leader in Android sales. It's unclear how many resources Nokia invested in its Android project, or how seriously it considered switching its entire business to the operating system, but it was certainly a thought in executives' minds.

Microsoft's $7.2 billion aquisition of Nokia's phone business is one for the history books — assuming the deal is approved — but how did this particular piece of history come about? The New York Times and All Things Digital have simultaneously published extremely similar accounts, both of which prominently feature a glass coffee table which left a nasty gash on Steve Ballmer's forehead. (The coffee table soon disappeared.) According to both reports, Microsoft and Nokia approached the bargaining table from very different positions, with Microsoft originally offerring far less than Nokia thought it was worth and hoping to keep Nokia's maps service as part of the deal.

Neither account disputes the recent Reuters report that Microsoft rushed the deal to a conclusion, but both suggest that the deal wasn't close to firm until July, and that the deal's key negotiators were Steve Ballmer and Nokia chairman Risto Siilasmaa, not former Microsoft executive Stephen Elop. If true, the accounts might go a little way towards convincing conspiracy theorists that Elop wasn't placed at Nokia specifically to sell it to his former employer, a popular theory since the day Elop jumped ship. Read the accounts at our source links below.

Microsoft's getting quite a bit out of its $7.2 billion purchase of Nokia's devices and services division: a phone hardware division, but also a great many patents, a still-powerful global distribution network, and a lot of employees. A lot of employees. Here's a quick visual breakdown of everything Steve Ballmer is buying from Stephen Elop.

Today, depending on your perspective, we either mourn the loss of one of the most important phone makers ever, or celebrate that the people behind so many iconic phones will continue to work under the Microsoft flag.

As Microsoft, Nokia, and any number of regulatory authorities get to work on finalizing the $7.3 billion deal that will see Microsoft buy Nokia's devices and services division, take a moment to look back at some of Nokia's most beautiful, important, and bizarre creations.

In the hours after Microsoft's announcement that it would be acquiring Nokia's devices and services business, Twitter has seen an outpouring of reactions from those affected by the merger. No one has more at stake than Nokia's employees; while Microsoft is committing to keep the base of its phone operations in Finland, it's also said it plans to cut $600 million annually in costs within the first 18 months after the merger. Needless to say, tensions are running high.

North American head of operator ecosystem Marc Kleinmaier's tweet underscores the uncertainty in the air while John Kneeland, a developer project manager at Nokia, points out what an emotional time it is for everyone at the company.

Microsoft’s press conference to explain the rationale behind its surprise Nokia acquisition is still hours away, but thanks to the slide deck posted on its investor site, we’re getting an early look at the thinking behind the deal. Long story short, Microsoft thinks it can save money and grow its platform faster by bringing its top hardware partner in-house, and it can finance the deal with overseas cash, limiting the deal’s impact on dividend-hungry shareholders. But the goal isn’t just to save money and get more devices in people’s hands — Microsoft is aiming to more than triple its current smartphone market share by 2018, from just over four percent today to 15 percent within five years.

As we reported earlier, Microsoft is paying €3.79 billion for Nokia’s devices and services business plus another €1.65 billion for its portfolio of patents. That entitles Microsoft to use Nokia’s inventions in all of its products going forward, and gives it rights to use Nokia’s HERE mapping technology, for which it will still pay annual fees. Redmond sees mapping and geospatial services as core to its strategy going forward, saying that that there needs to be "an effective alternative to Google" and "more than one ‘digital map of the world.’" It also believes that Nokia’s patent portfolio is extremely valuable — one of the "top two" in wireless technologies — and that the licenses Nokia has in place will give it a valuable income stream going forward. And while Microsoft’s license on Nokia’s utility patents "only" lasts for 10 years, the company will have the option to make it permanent.

The Nokia brand name, one of the most storied marks in mobile, will never grace another smartphone.

Under the terms of Microsoft's $7.2 billion acquisition of Nokia's devices and services division, the "Asha" and "Lumia" trademarks will transfer to Redmond, but the "Nokia" mark will remain property of the Finnish company, and may only be used on featurephones running the basic Series 30 and Series 40 operating systems under a 10-year license agreement. (Nokia itself is barred from using the Nokia brand on any mobile devices at all until December 31st, 2015.) That means any future Windows Phones built by the newest division of Microsoft will be Microsoft-branded — and that Nokia has said its goodbyes to a smartphone market it once helped to create.

In a surprising move early Tuesday, Microsoft announced that it would be acquiring Nokia's devices and services division, effectively making the Finland-based phone maker a first-party hardware manufacturer for Windows Phone devices (and their related services). Stephen Elop will step aside as CEO of Nokia and return to Microsoft as head of its devices team — this all on the heels of the recent announcement that Steve Ballmer would step down as Microsoft CEO within the next 12 months.

The Verge had a chance to speak with Steve and Stephen — as well as Nokia board of directors chairman Risto Siilasmaa — about the massive transition. Ballmer was particularly talkative, though he sounded weary, either from jet lag or a very long month. However, the current CEO wouldn't give up details on whether Elop was a prime candidate for the top slot at the company (as many have speculated). "Our board is going through a process open to internal and external candidates. It's a process that they wanted well-known so they could consider everybody, internally and externally. Stephen Elop happens to be going from external to internal, but our board will consider everybody. They will do it in private — that's the right way for the board to conduct its business."

As the company announced the shocking news that it's to buy Nokia's devices and services division, outgoing Microsoft CEO Steve Ballmer sent a letter to Microsoft employees outlining the reasoning for the acquisition, and the upcoming changes that will occur as a result. Here's that letter in full:

With everyone in the tech world fixated on Microsoft’s acquisition of Nokia’s devices business, one question people are demanding the answer to is what Microsoft’s new integration will mean for its device partners. The official line at Microsoft is that it’s still eager to work with other manufacturers making Windows Phone devices. "Our OS group mission is to enable the innovations of our hardware partners to shine through on the Windows platform," said Terry Myerson, the company’s vice president of operating systems. But while Microsoft still plans to license its mobile software to other companies building Windows Phone devices, is anyone even interested?

As Steve Ballmer states in an interview with New York Times journalist Nick Wingfield, Nokia already makes up about 80 percent of Windows Phone sales globally. And while Samsung and HTC are still dutifully trickling out devices running the mobile OS, Microsoft's decision to tie itself even more tightly to Nokia is guaranteed to rouse concerns about the future's prospects among its manufacturing partners. As highly as the company might value its open approach to software licensing, Microsoft is now moving into direct competition with its partners, exactly like it has with its Surface line of Windows 8 and Windows RT tablets.