Microsoft+Nokia=Win-Win, Says Ballmer, As Elop "Mixed" On His Microsoft Return

Two years after hitching its fate to Microsoft's Windows Phone software, Nokia turns to the U.S. software giant, agreeing to sell its main handset business for 5.44 billion euros ($7.2 billion).

HELSINKI, FINLAND (SEPTEMBER 3, 2013)(REUTERS) - Microsoft said it will buy Nokia's phone business and license its patents for 5.44 billion euros (7.2 billion U.S. dollars), making its boldest foray yet into mobile devices.

The sale of Nokia's phone business marks the exit of a 150-year-old company that once dominated the global cellphone market and remains one of Europe's premier technology brands, even though Apple and Samson Electronics' ascendancy all but reduced it to irrelevancy in Asia and North America in recent years.Nokia - reduced to its networks business, navigation offerings and patent portfolio after the sale - is still the world's No. 2 mobile phone maker behind Samson, but it is not in the top five in the more lucrative and faster-growing smartphone market.

Sales of Nokia's Lumia series have helped the market share of Windows Phones in the globalsmartphone market climb to 3.3 per cent, according to consultancy Gartner, overtaking ailing BlackBerry for the first time this year. Still, Google Inc's Android and Apple's iOS system make up 90 per cent of the market.

At a news conference in Helsinki, Nokia board chairman and interim CEO Risto Siilasmaa said this was the right course of action.

"I've been an entrepreneur for most of my life and that is how I think of myself. For me entrepreneurship is not a profession, it's a way of life. Being an entrepreneur means aspiring to build products that change the world, selling businesses isn't nearly as cool but sometimes it is the right course of action," he said in his opening remarks.

But he also said it had not been an easy decision to make.

"We had to first fully understand whether there was a way to change the current partnership in a manner that would allow both companies to separately win in the smart devices market. We spent significant time working out potential incremental improvements before concluding that it was acceptable to engage in a discussion regarding a transaction. The Nokia board and its subcommittees have convened almost fifty times since the beginning of this year," Siilasmaa said.

Siilasmaa said the sale would be good for the broader Finnish economy.

"The Nokia Board of Directors believes that this transaction creates significant economic value to our share holders. We expect it will be significantly accretive to earnings, it will clearly strengthen our financial position and it will provide a solid basis for future investment in Nokia's continuing businesses. For our employees in devices and services who will transfer to Microsoft they will have a stronger financial backing to be successful in the mobile market place. And Finland becomes a core base for Microsoft in Europe. It's worth stressing that as a result of the agreement today, instead of one Nokia there will be two global technology companies in Finland both financially stronger and capable to invest in the future. This can be an important accelerator in the broader Finnish economy. For all these reasons we came to the conclusion that this transaction creates more value for Nokia that could otherwise be realised," he said.

Nokia's Canadian boss Stephen Elop, who ran Microsoft's business software division before jumping to Nokia in 2010, will now return to the U.S. firm as head of its mobile devices business.

Elop has been cited among the frontrunners to take over from Microsoft's retiring CEO Steve Ballmer, criticised for missing the mobile revolution, kicking off Microsoft's foray into the market with the tepid-selling Surface tablet only in 2012.

Ballmer said much of the business would remain in Finland.

"We have no significant plans to shift around the world where work is done. We want it done where it is done today. That approach has been very successful for us with acquisitions such as Skypewhich has a large R&D footprint in Estonia, NEVISION which is concentrated in Denmark, Infastwhich remains concentrated in Oslo. We are certainly deeply committed to Finland. Finland, will be as I said, the centre of our phone device research and development work. We are beyond excited to have a strong and talented team join us in Finland with the expertise in hardware supply chain management's operations and more." he said.

Buying Nokia's gadget business thrusts Microsoft deeper into the hotly contested market, despite some investors urging the company to stick to its core strengths of business software and services.

But Ballmer said the deal was a "win win" for customers, employees and shareholders.

"We'll be very good corporate citizens here in Finland and we'll make new investments. Specifically today we're announcing that we've selected Finland as the home of a new data centre for Microsoft that will serve consumers throughout Europe. That will represent an investment of over 250 million dollars in capital and operations over the next few years. Today's announcement is a bold step into the future. For Microsoft it's also a signature event, a signature event, in our transformation. We think this is win win for employees, win win for share holders and win win for customers of both companies"he said.

Nokia said in a statement it expected that, as well as Elop, senior executives Jo Harlow, Juha Putkiranta, Timo Toikkanen and Chris Weber would transfer to Microsoft when the deal is concluded. It did not say what roles they would take there.

Elop said he had mixed feelings about the deal and his return to Microsoft, in a slip of the tongue, talking about "going back to Nokia" in remarks seemingly referring to Microsoft.

"It's very clear to me that rationally this is the right next step to going forward. Emotionally, as I tried to describe in my prepared remarks, I think my feelings today are a mix of feelings as it relates to the possibility of pushing forward more aggressively and winning in this battle we have but at the same time having a great deal of sadness about the changes we're trying to introduce. Going back to Nokia for me is as much ambiguous for me as it is for other people. It's been some years since I've been there, the organization is changed , there's many other changes underway so on the way so I think for me as well I look forward with some trepidation and understanding what that represents so I think like some 32,000 other employees , what is really ahead, we have that still to learn."

Elop said.

Siilasmaa would take over CEO duties while the Finnish firm looked for a new CEO, it said.

The deal is expected to close in the first quarter of 2014, subject to approval by Nokia shareholders and regulators.