John Paczkowski

Recent Posts by John Paczkowski

Microsoft-Nokia Deal Gets Go-Ahead From Justice Department

green_light

Shutterstock / Lisa S.

It’s a regulatory green light for Microsoft’s pending acquisition of Nokia’s phone business.

The U.S. Department of Justice unconditionally approved the $7.2 billion deal last Friday, rubber-stamping a massive transaction that will see Microsoft acquire Nokia’s devices and services business and license the company’s mapping services, a move that Microsoft CEO Steve Ballmer said will accelerate the company’s share and profits in phones. In a statement, Microsoft said it was pleased to receive the approval of the Justice Department, and is looking “forward to the date when our partners at Nokia will become members of the Microsoft family.”

A milestone moment for Microsoft, and one that clearly shows the company recognizing two crucial truths:

1. It must create a first-rate Microsoft phone experience in order for it to succeed in the smartphone business.

2. It cannot afford to allow Google and Apple to foreclose the smartphone ecosystem by utterly dominating software and hardware innovation in this sphere.

The next hurdle to be overcome: Regulatory approval in the European Union.

Here’s a quick refresher on the numbers behind the deal:

  • Microsoft is spending about $7.2 billion to acquire Nokia’s core cellphone business.
  • Of that, $5 billion is for Nokia’s devices business.
  • The remaining $2.18 billion is to license Nokia’s intellectual property
  • Nokia’s patent portfolio includes some 8,500 design patents.
  • It also includes approximately 30,000 utility patents and patent applications.
  • About 32,000 Nokia employees are expected to transfer to Microsoft as part of the deal.
  • About 18,300 of those are “directly involved in manufacturing.”
  • But 56,000 Nokia employees will remain at the company once the deal has closed.
  • With 8.7 million units shipped, Windows Phone had a 3.7 percent share of global smartphone market in the second quarter of 2013, according to IDC.
  • Windows Phone has greater than 10 percent share in nine markets, according to Microsoft.
  • Windows Phone is outselling BlackBerry in 34 markets — again, according to Microsoft.
  • Nokia accounted for 81.6 percent of all Windows Phone smartphone shipments during the second quarter of 2013.
  • Microsoft’s gross margin on sales of Nokia’s Windows Phone handsets before the deal: Less than $10.
  • Microsoft’s expected gross margin on sales of Nokia’s Windows Phone handsets after the deal: More than $40.
  • Nokia’s share of the smartphone market was 49.4 percent in 2007.
  • By fall of 2012, it was 4.3 percent.

(Image courtesy of Shutterstock / Lisa S.)


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