ESPOO, FINLAND--(Marketwired - September 2, 2013) -
Nokia Corporation
Stock Exchange Release
September 3, 2013 at 06.00 (CET +1)
REDMOND, Washington and ESPOO, Finland - 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
non-exclusive
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 via: 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.
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.
All information in this release is as of September 2, 2013. Microsoft
undertakes
no duty to update any forward-looking statement to conform the statement to
actual results or changes in the company's expectations.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: NOKIA via Thomson Reuters ONE
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