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A sign
points to the headquarters of Finnish mobile phone manufacturer
Nokia, in
Espoo, on September 3, 2013 (Lehtikuva/AFP, Sari Gustafsson)
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HELSINKI —
Beleaguered Finnish company Nokia announced on Tuesday the sale of its mobile
phone unit to Microsoft for 5.44 billion euros ($7.17 billion), bringing to an
end its days as a phone maker.
Nokia will
grant the US software giant a 10-year non-exclusive licence to its patents and
will itself focus on network infrastructure and services, which it called
"the best path forward for Nokia and its shareholders."
The company
also announced the immediate departure of chief executive Stephen Elop, who was
hired from Microsoft in 2010 to turn the company around.
He will be
replaced in the interim by Risto Siilasmaa, Nokia's chairman of the board.
Nokia
dominated the mobile phone market for 14 years, until it was overtaken by
Samsung in 2012 as the top-selling brand, as it struggled to establish winning
business models and mobile devices.
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A Nokia
Lumia 1020 smartphone is seen
in New York, on July 11, 2013 (AFP/File,
Timothy
Clary)
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Rumours of
a Nokia sale have swirled in recent months.
Amid
increasing competition from Apple and Samsung, Nokia dramatically changed its
strategy in February 2011 when Elop warned the company was "standing on a
burning platform" and needed to shift course immediately.
The
shake-up involved phasing out Nokia's Symbian platform in favour of a
partnership with Microsoft, introducing handsets powered by Windows Phone
software.
Nokia bet
its future on its new Lumia smartphones, aiming to rival Apple's iPhone and
Samsung's Galaxy.
But
Tuesday's announcement marks the end of Nokia's days as an independent phone
manufacturer.
Some 32,000
Nokia employees are expected to transfer to Microsoft once the deal is
concluded, including approximately 4,700 people in Finland, the company said.
The
operations affected by the transfer generated approximately 14.9 billion euros
in 2012, or almost 50 percent of Nokia's net sales, it added.
Of the total
purchase price of 5.44 billion euros, 3.79 billion relates to the purchase of
Nokia's devices and services business, and 1.65 billion relates to the mutual
patent agreement and future options.
Nokia will
book a gain on the sale of some 3.2 billion euros, which would "clearly
strengthen our financial position and it will provide a solid basis for future
investment in Nokia's continuing businesses," Siilasmaa said.
Last month,
Nokia finalised the purchase of German engineering giant Siemens' 50-percent
stake in Nokia Siemens Networks (NSN) for 1.7 billion euros.
NSN, which
is specialised in high-speed mobile broadband, was set up as a joint venture
between the two companies in 2007, a partnership that expired in April. The
unit has posted stronger earnings than Nokia's mobile phone business.
NSN posted
a net profit of 8.0 million euros in the second quarter of this year, compared
to Nokia's net loss of 227 million euros in the same period.
The sale to
Microsoft is expected to be completed in the first quarter of 2014, pending
approval by Nokia shareholders and regulatory authorities, Nokia said.
Microsoft
chief executive Steve Ballmer meanwhile told reporters in a conference call
that Windows Phone was "the fastest growing smart platform today, growing
by 78 percent last year."
"Today's
agreement will accelerate our success in smartphones," he added.
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