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Originally published Friday, April 25, 2014 at 6:41 PM

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Microsoft purchase of Nokia’s handset business is complete

Seven months after it was announced, Microsoft’s deal to acquire Nokia’s handset business has been completed. The acquisition adds 25,000 employees to Microsoft rolls and puts the company deep into the devices business.


Seattle Times technology reporter

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As expected, Microsoft’s $7.5 billion acquisition of Finland-based Nokia’s handset business closed Friday, making the software giant one of the world’s largest mobile phone-makers.

Microsoft also adds to its payroll some 25,000 now-former Nokia employees, many of whom work in the phone-maker's factories worldwide.

That 25,000 figure is lower than the 32,000 previously announced, in part because Microsoft will not be taking over Nokia’s factory in Chennai, India.

Tax liens on Nokia’s assets in India prevent the factory’s transfer.

“In India, our manufacturing facility is subject to an asset freeze by the Indian tax authorities as a result of ongoing tax proceedings. Consequently, the facility remains part of Nokia following the closing of the transaction,” Nokia said in a news release Friday. “Nokia and Microsoft have entered into a service agreement whereby Nokia would produce mobile devices for Microsoft.”

Microsoft will also not be taking over Nokia’s factory in Masan, South Korea, because of “excess manufacturing capacity,” a spokeswoman said.

That factory, which employs 200 people manufacturing component parts for phones, will be closing, Nokia said.

Nokia said it will have more details about the closure of the deal during its first-quarter earnings results announcement Tuesday.

Microsoft and Nokia announced last September the plan for Microsoft to purchase Nokia’s handset business, as well as to license Nokia’s patents and mapping services.

As part of the deal, the Finnish company retains the Nokia brand, though Microsoft has licensed the brand for 10 years for Nokia’s basic mobile phones.

Microsoft has also licensed the Nokia brand “for the purpose of marketing Nokia branded smart devices for a limited time,” a Microsoft spokeswoman said.

For now at least, the Redmond-based company is not changing the names or branding of the Nokia products.

There are also no significant plans to shift where Nokia’s work is currently being done.

“The former Nokia employees will stay largely in place geographically and few, if any, transfers to Microsoft headquarters are planned,” a Microsoft spokeswoman said.

One move that will take place as previously announced is the return of former Nokia CEO (and former Microsoft executive) Stephen Elop, who now becomes executive vice president of Microsoft’s Devices group.

“Today is an exciting day as we join the Microsoft family, and take the first, yet important, step in our long-term journey,” Elop said in a letter published on the Microsoft Mobile — previously Nokia — conversations site.

Nokia’s Lumia smartphones, tablets and its mobile phones now become part of the Microsoft Devices Group, which also includes Xbox, Surface, Perceptive Pixel (large touch-screen displays), and accessories such as keyboards and mice.

As of Friday, Microsoft also will begin honoring all Nokia customer warranties for existing devices.

With the deal, Microsoft immediately shoots upward in the rankings of the world’s largest handset makers.

Last year, Nokia was the world’s No. 2 phone manufacturer, behind Samsung, for all handsets, including basic mobile phones, feature phones (which have more features than basic mobile phones but less computing power than smartphones), and smartphones.

But Nokia ranked No. 8 among smartphone manufacturers in 2013.

The companies entered a partnership in February 2011, whereby Windows Phone became Nokia’s primary smartphone platform.

While the partnership has boosted sales volume of Windows Phone (for which Nokia’s Lumia line of Windows Phones was almost single-handedly responsible), the operating system’s market share is still tiny.

Windows Phone represented only 3 percent of the smartphones sold worldwide in 2013, according to research firm Gartner. (Microsoft’s tablet operating system, meanwhile, held just 2 percent of that market.)

While acquiring Nokia’s handset operations brings on a slew of manufacturing challenges Microsoft has never faced before, it’s an opportunity for the company to gain market share for its mobile operating systems, while also playing a key role in new CEO Satya Nadella’s vision for Microsoft.

“Today we welcome the Nokia Devices and Services business to our family. The mobile capabilities and assets they bring will advance our transformation,” Nadella said in a news release. “Together with our partners, we remain focused on delivering innovation more rapidly in our mobile-first, cloud-first world.”

Janet I. Tu: 206-464-2272 or jtu@seattletimes.com. On Twitter @janettu.



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