With the acquisition of Nokia, Microsoft is trying to give its Windows Phone operating system a boost

Nokia ends phone production as sale to Microsoft complete

Nokia, once the world’s number one mobile phone manufacturer, has completed the sale of its mobile phone business to Microsoft, prompted by a continuous decline in sales the company has been struggling with since switching to Windows Phone in 2011. 

After a series of regulatory approvals and a blessing from Nokia shareholders, Microsoft has confirmed that with effect from 25 April, it has taken over Nokia’s mobile phone business including 25,000 employees in 50 countries and a license portfolio of Nokia’s patents.

More than 4,000 employees in Finland will transfer to Microsoft and the Nokia headquarters in Espoo, near the Finnish capital Helsinki will be taken over by the US giant.

Finnish Nokia, who will keep its telecommunications network service branch, has received some £4.47bn for the transaction.

Microsoft will continue manufacturing Nokia’s tablets and smartphones, including the flagship Lumia, hoping the acquisition will help boost the interest in its Windows Phone operating system, which is currently lagging behind Apple’s iOS and Google’s Android.

The acquisition is a sad end to a story of a once phenomenally successful mobile phone manufacturer. At the outset of the mobile phone revolution, Nokia celebrated a series of triumphs with successful products that won customers over with intuitive user interfaces, larger displays and interchangeable faceplates. Its 1100 handset launched in 2003 became the most popular mobile phone of all time, selling some 200 million units worldwide.

The turning point came in 2008 after Apple launched its iPhone 3G, doubling in sales every year. Soon after, Nokia’s own operating system Symbian, originally run on Samsung and Sony Ericsson devices, started losing not only to Apple’s iOS but also to Google’s Android, launched in 2008.

The alliance with Microsoft started in 2011, when Nokia’s CEO Stephen Elop, former head of Microsoft’s business division, decided to ditch Symbian in favour of the Windows Phone operating system.

However, from this moment on, Nokia’s smartphone sales, so far satisfying though no longer phenomenal, started to plummet. Between February 2011 and 2013, Nokia slid from the world’s number one smartphone seller to number ten.

Financial difficulties and first plant closures and redundancies soon followed.

With the sale of the smartphone business now complete, Nokia is expected to focus on its networks, mapping services and technology development and licences.

"The new Nokia can now go forward and concentrate on its remaining assets," said Neil Mawston, from Strategy Analytics, near London. "It has one of the best IPR (intellectual property rights) assets in the entire industry and it has good mapping services."

Nokia said two plants will remain outside the deal - a manufacturing unit in Chennai, India, subject to an asset freeze by Indian tax authorities, and the Masan plant in South Korea, which it plans to shut down. The adjustments have no impact on the deal and Nokia "will be materially compensated for any retained liabilities", the company said.

Former Nokia CEO Stephen Elop will serve as executive vice president of the Microsoft Devices Unit, which will include Nokia's former Lumia smartphones and tablets, Microsoft said.

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