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Microsoft Completes Acquisition of Nokia's Phone Business

As expected, Microsoft's $7.2 billion acquisition of Nokia's devices and services business closed on Friday.

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

According to the terms of the deal, Microsoft now owns Nokia's device manufacturing arm -- encompassing both mobile phones and smartphone devices -- and related sales, marketing and support units. Microsoft also acquires the right to license Nokia's patents for 10 years.

Nokia's phone business, previously called Nokia Oyj, will be renamed Microsoft Mobile Oy, Microsoft confirmed in its announcement. The new subsidiary "develops, manufactures and distributes Lumia, Asha and Nokia X mobile phones and other devices."

About 25,000 Nokia employees will be transfered to Microsoft, including former Nokia CEO Stephen Elop. Elop, who was once president of the Microsoft Business Division before leaving for Nokia in 2010, will now become the executive vice president of the Microsoft Devices Group. He will be responsible for all Nokia tablets, mobile phones and smartphones; Microsoft's Surface tablet lineup; Xbox hardware; and technology from Perceptive Pixel, the touchscreen manufacturer Microsoft acquired in 2012. Elop will report to Nadella.

Microsoft and Nokia indicated earlier this week that some of the terms of the deal have been adjusted from the original agreement. As part of those changes, Microsoft will manage Nokia's social media assets and the Nokia.com domain for up to one year. Additionally, 21 Nokia employees based in China who work under the company's Chief Technology Office will move to Microsoft (the original terms called for the entire Chief Technology Office to remain with Nokia). Microsoft will also not acquire Nokia's plant in Korea as originally planned.

A Nokia factory in Chennai, India will also remain with Nokia while the company works to resolve a tax issue with authorities there.

The Nokia acquisition is the second-biggest in Microsoft's history, in terms of value, surpassed only by the $8.5 billion acquisition of Skype in 2011. However, Nokia said in its own announcement of the deal's closing that the original $7.2 billion price tag could wind up "slightly higher." The company will reveal the acquisition's final cost during its earnings call next week.

First announced in September, the acquisition was initially expected to close in the first quarter of 2014, but was postponed due to delays in getting approval from some Asian regulators, particularly in China. The deal cleared that hurdle earlier this month.

Nokia has been Microsoft's most important Windows Phone partner since 2011, when the Finland-based company agreed to base its smartphone devices on Microsoft's smartphone OS. Nokia's Lumia line of devices currently accounts for the vast majority -- roughly 90 percent -- of all Windows Phone devices shipped worldwide.

About the Author

Gladys Rama is the senior site producer for Redmondmag.com, RCPmag.com and MCPmag.com.

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