REDMOND, Washington and ESPOO, Finland – Sept. 3, 2013 –
Microsoft Corporation and Nokia Corporation today announced that the
Boards of Directors for both companies have decided to enter into a
transaction whereby Microsoft will purchase substantially all of Nokia’s
Devices & Services business, license Nokia’s patents, and license
and use Nokia’s mapping services.
Under the terms of the agreement, Microsoft will pay EUR 3.79 billion
to purchase substantially all of Nokia’s Devices & Services
business, and EUR 1.65 billion to license Nokia’s patents, for a total
transaction price of EUR 5.44 billion in cash. Microsoft will draw upon
its overseas cash resources to fund the transaction. The transaction is
expected to close in the first quarter of 2014, subject to approval by
Nokia’s shareholders, regulatory approvals and other closing conditions.
Building on the partnership with Nokia announced in February 2011 and
the increasing success of Nokia’s Lumia smartphones, Microsoft aims to
accelerate the growth of its share and profit in mobile devices through
faster innovation, increased synergies, and unified branding and
marketing. For Nokia, this transaction is expected to be significantly
accretive to earnings, strengthen its financial position, and provide a
solid basis for future investment in its continuing businesses.
“It’s a bold step into the future – a win-win for employees,
shareholders and consumers of both companies. Bringing these great teams
together will accelerate Microsoft’s share and profits in phones, and
strengthen the overall opportunities for both Microsoft and our partners
across our entire family of devices and services,” said Steve Ballmer,
Microsoft chief executive officer.
“In addition to their innovation and
strength in phones at all price points, Nokia brings proven capability
and talent in critical areas such as hardware design and engineering,
supply chain and manufacturing management, and hardware sales, marketing
and distribution.”
“We are excited and honored to be bringing Nokia’s incredible people,
technologies and assets into our Microsoft family. Given our long
partnership with Nokia and the many key Nokia leaders that are joining
Microsoft, we anticipate a smooth transition and great execution,”
Ballmer said.
“With ongoing share growth and the synergies across
marketing, branding and advertising, we expect this acquisition to be
accretive to our adjusted earnings per share starting in FY15, and we
see significant long-term revenue and profit opportunities for our
shareholders.”
“For Nokia, this is an important moment of reinvention and from a
position of financial strength, we can build our next chapter,” said
Risto Siilasmaa, Chairman of the Nokia Board of Directors and, following
today’s announcement, Nokia Interim CEO.
“After a thorough assessment
of how to maximize shareholder value, including consideration of a
variety of alternatives, we believe this transaction is the best path
forward for Nokia and its shareholders. Additionally, the deal offers
future opportunities for many Nokia employees as part of a company with
the strategy, financial resources and determination to succeed in the
mobile space.”
“Building on our successful partnership, we can now bring together
the best of Microsoft’s software engineering with the best of Nokia’s
product engineering, award-winning design, and global sales, marketing
and manufacturing,” said Stephen Elop, who following today’s
announcement is stepping aside as Nokia President and CEO to become
Nokia Executive Vice President of Devices & Services.
“With this
combination of talented people, we have the opportunity to accelerate
the current momentum and cutting-edge innovation of both our smart
devices and mobile phone products.”
Nokia has outlined its expected focus upon the closing of the transaction in a separate press release published today.
TERMS OF THE AGREEMENT
Under the terms of the agreement, Microsoft will acquire substantially
all of Nokia’s Devices and Services business, including the Mobile
Phones and Smart Devices business units as well as an industry-leading
design team, operations including all Nokia Devices &
Services-related production facilities, Devices & Services-related
sales and marketing activities, and related support functions. At
closing, approximately 32,000 people are expected to transfer to
Microsoft, including 4,700 people in Finland and 18,300 employees
directly involved in manufacturing, assembly and packaging of products
worldwide. The operations that are planned to be transferred to
Microsoft generated an estimated EUR 14.9 billion, or almost 50 percent
of Nokia’s net sales for the full year 2012.
Microsoft is acquiring Nokia’s Smart Devices business unit, including
the Lumia brand and products. Lumia handsets have won numerous awards
and have grown in sales in each of the last three quarters, with sales
reaching 7.4 million units in the second quarter of 2013.
As part of the transaction, Nokia is assigning to Microsoft its
long-term patent licensing agreement with Qualcomm, as well as other
licensing agreements.
Microsoft is also acquiring Nokia’s Mobile Phones business unit, which
serves hundreds of millions of customers worldwide, and had sales of
53.7 million units in the second quarter of 2013. Microsoft will acquire
the Asha brand and will license the Nokia brand for use with current
Nokia mobile phone products. Nokia will continue to own and manage the
Nokia brand. This element provides Microsoft with the opportunity to
extend its service offerings to a far wider group around the world while
allowing Nokia’s mobile phones to serve as an on-ramp to Windows Phone.
Nokia will retain its patent portfolio and will grant Microsoft a
10-year license to its patents at the time of the closing. Microsoft
will grant Nokia reciprocal rights to use Microsoft patents in its HERE
services. In addition, Nokia will grant Microsoft an option to extend
this mutual patent agreement in perpetuity.
In addition, Microsoft will become a strategic licensee of the HERE
platform, and will separately pay Nokia for a four-year license.
Microsoft will also immediately make available to Nokia EUR 1.5
billion of financing in the form of three EUR 500 million tranches of
convertible notes that Microsoft would fund from overseas resources. If
Nokia decides to draw down on this financing option, Nokia would pay
back these notes to Microsoft from the proceeds of the deal upon
closing. The financing is not conditional on the transaction closing.
Microsoft also announced that it has selected Finland as the home for a
new data center that will serve Microsoft consumers in Europe. The
company said it would invest more than a quarter-billion dollars in
capital and operation of the new data center over the next few years,
with the potential for further expansion over time.
NOKIA LEADERSHIP CHANGES
Nokia expects that Stephen Elop, Jo Harlow, Juha Putkiranta, Timo
Toikkanen, and Chris Weber would transfer to Microsoft at the
anticipated closing of the transaction. Nokia has outlined these changes
in more detail in a separate release issued today.
EXTRAORDINARY SHAREHOLDERS MEETING
Nokia plans to hold an Extraordinary General Meeting on November 19,
2013. The notice of the meeting and more information on the transaction
and its background are planned to be published later this month.
PRESS CONFERENCE
Nokia will host a press conference today, Tuesday, Sept. 3, at 11 a.m.
EEST in Dipoli, Espoo (Otakaari 24). Registration will start at 10
a.m., and the doors will open at 10.40 a.m. Due to space constraints,
only media who show valid press credentials at the registration will be
admitted. Media are encouraged to watch a live webcast of the press
conference at: http://press.nokia.com/
INVESTOR CALLS
Microsoft will hold a conference call for investors, financial
analysts and news media Tuesday, Sept. 3, at 3:45 p.m. EEST/8:45 a.m.
EDT. Interested parties should call toll-free at (888) 459-9165, or for
international calls dial +1-773-799-3324. You may also access the call
online at http://www.microsoft.com/investor.
Nokia executives will hold an investor call at 3 p.m. EEST today,
Tuesday, Sept. 3. A webcast of the conference call will be available at
http://investors.nokia.com. Media representatives can view the webcast
or listen in at +1 706 634 5012, conference ID 45390451.
MEDIA ENQUIRIES
Microsoft
Rapid Response Team, Waggener Edstrom Worldwide, +1 (503) 443-7070, rrt@waggeneredstrom.com
Rapid Response Team, Waggener Edstrom Worldwide, +1 (503) 443-7070, rrt@waggeneredstrom.com
FORWARD-LOOKING STATEMENTS: NOKIA
It should be noted that Nokia and its
business are exposed to various risks and uncertainties and certain
statements herein that are not historical facts are forward-looking
statements, including, without limitation, those regarding: A) the
planned sale by Nokia of substantially all of Nokia’s Devices &
Services business, including
Smart Devices and Mobile Phones (referred to below as "Sale of the
D&S Business") pursuant to a purchase agreement between Nokia and
Microsoft (referred to below as “Agreement”); B) the closing of the Sale
of the D&S Business; C) obtaining the shareholder approval for the
Sale of the D&S Business; D) receiving timely, or at all, necessary
regulatory approvals for the Sale of the D&S Business; E)
expectations, plans or benefits related to or caused by the Sale of the
D&S Business; F) expectations, plans or benefits related to Nokia’s
strategies, including plans for Nokia with respect to its continuing
business areas that will not be divested in connection with the Sale of
the D&S Business; E) expectations, plans or benefits related to
changes in leadership and operational structure; F) expectations and
targets regarding our operational priorities, financial performance or
position, results of operations and use of proceeds from the Sale of the
D&S Business; and G) statements preceded by "believe," "expect,"
"anticipate," "foresee," “sees,” "target," "estimate," "designed,"
"aim", "plans," "intends," “focus,” "will" or similar expressions. These
statements are based on management's best assumptions and beliefs in
light of the information currently available to it. Because they involve
risks and uncertainties, actual results may differ materially from the
results that we currently expect. Factors, including risks and
uncertainties that could cause these differences include, but are not
limited to: 1) the inability to close the Sale of the D&S Business
in a timely manner, or at all, for instance due to the inability or
delays in obtaining the shareholder approval or necessary regulatory
approvals for the Sale of the D&S Business, or the occurrence of any
event, change or other circumstance that could give rise to the
termination of the Agreement; 2) the potential adverse effect on the
sales of our mobile devices, business relationships, operating results
and business generally resulting from the announcement of the Sale of
the D&S Business or from the terms that we have agreed for the Sale
of the D&S Business; 3) any negative effect caused by us entering
into the Sale of the D&S Business, as we may forego other
competitive alternatives for strategies or partnerships that would
benefit our Devices & Services business and if the Sale of the
D&S Business is not closed, we may have limited options to continue
the Devices & Services business or enter into another transaction on
terms favorable
to us, or at all; 4) our ability to effectively and smoothly implement
planned changes to our leadership and operational structure or maintain
an efficient interim governance structure and preserve or hire key
personnel; 5) any negative effect from the implementation of the Sale of
the D&S Business, which will require significant time, attention
and resources of our senior management and others within the company
potentially diverting their attention from other aspects of our
business; 6) disruption and dissatisfaction among employees caused by
the plans and implementation of the Sale of the D&S Business
reducing focus and productivity in areas of our business; 7) the amount
of the costs, fees, expenses and charges related to or triggered by the
Sale of the D&S Business; 8) any impairments or charges to carrying
values of assets or liabilities related to or triggered by the Sale of
the D&S Business; 9) potential adverse effect on our business,
properties or operations caused by us implementing the Sale of the
D&S Business; 10) the initiation or outcome of any legal
proceedings, regulatory proceedings or enforcement matters that may be
instituted against us relating to the Sale of the D&S Business; and,
as well as the risk factors specified on pages 12-47 of Nokia's annual
report on Form 20-F for the year ended December 31, 2012 under Item 3D.
"Risk Factors." and risks outlined in our most recent interim report.
Other unknown or unpredictable factors or underlying assumptions
subsequently proving to be incorrect could cause actual results to
differ materially from those in the forward-looking statements. Nokia
does not undertake any obligation to publicly update or revise
forward-looking statements, whether as a result of new information,
future events or otherwise, except to the extent legally required.
Forward-Looking Statements: Microsoft
This press release contains
forward-looking statements, which are any predictions, projections or
other statements about future events based on current expectations and
assumptions that are subject to risks and uncertainties. The potential
risks and uncertainties include, among others, that the expected
financial and other benefits from the Nokia transaction may not be
realized, including because of: our inability to close the transaction,
or Nokia’s inability to repay the financing should it take down the
financing and the transaction doesn’t close; the response to the
acquisition by the customers, employees, and strategic and business
partners of Nokia’s Devices & Services business; the extent to which
we achieve anticipated operating efficiencies and cost savings, and
anticipated smart device and mobile phone market share targets; the
overall growth rates for the smart device and mobile phone markets;
ongoing downward pressure on prices for mobile devices; unanticipated
restructuring expenses; any restrictions or limitations imposed by
regulatory authorities; the impact of Microsoft management and
organizational changes resulting from acquisition of Nokia’s Devices
& Services business; the ability to retain key Nokia personnel; our
effectiveness in integrating the Nokia Devices & Services business
with Microsoft’s businesses; the response of existing Microsoft smart
devices original equipment manufacturers; risks related to the Nokia
Devices & Services international operations; and our ability to
realize our broader strategic and operating objectives. Actual results
may differ materially from the forward-looking statements because of
these and other risk and uncertainties of
our business, which are described in our filings with the Securities
and Exchange Commission (“SEC”), including our Forms 10-K and 10-Q.
For further information regarding risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/investor.
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