Microsoft’s bid to acquire the Devices and Services division of once mighty Finnish cellphone manufacturer Nokia is one step closer to completion after the vast majority of Nokia’s shareholders voted for the deal to go through. According to the Financial Times the €5.44 billion deal (over R75 billion) was supported by 99.7% of the shareholders surveyed. The only hurdles left for the deal to be approved now are the regulatory ones similar to those that Google managed to pass muster on when it acquired Motorola Mobility in 2011/2012.
The terms of the deal fall into two distinct parts, the acquisition of the mobile phone division and a potent licencing deal. The outright purchase of the hardware division sees Microsoft take over both the Lumia smartphones that run its Windows Phone OS and the Nokia Asha series of low-cost, pseudo-smart feature phones as well as absorbing around 32 000 employees that will transfer from Nokia to Microsoft. As per the terms of the patent deal Microsoft gets a 10-year, non-exclusive license to Nokia’s massive portfolio of patents. Nokia will receive “reciprocal rights” to Microsoft’s mapping patents for its HERE mapping services. Microsoft pays Nokia €3.79-billion for the devices business and another €1.65-billion for the patents. Nokia will continue to own the ‘Nokia’ name but Microsoft will be able to use it for all of the Asha branded devices it releases which will help it with the brand equity that the name Nokia brings in Africa and Asia.
In buying Nokia, Microsoft crucially gains the ability to manage its Windows Phone ecosystem in the same way that Apple and Google are able to manage theirs by controlling both hardware and software innovation. There are price efficiencies gained by not having both companies spending money on developing and marketing the same platform.