On September 2, 2013, Microsoft and Nokia announced that the two companies will enter a significant business transaction that will rock the industry. 

You can read the Microsoft press release in its entirety.

Assuming the deal closes, Microsoft will acquire, for 5.44 billion Euros (7.18 billion US dollars) in cash, Nokia’s Devices and Services business, which includes the Mobile Phones and Smart Devices units, from top to bottom. 

Leadership, engineering, supply chain, production facilities, design, sales & marketing, support, and an estimated 32,000 of Nokia’s employees… The whole thing becomes Microsoft.

The sequence of events over the last couple of months is spooky for me. 

Approximately 18 months ago, I heard from several sources that after Windows 8 was launched, Ballmer would step down, Microsoft would buy Nokia’s then-developing Windows-based devices business, and a few other bits that I look forward, now, to seeing play out.

Obviously, when Microsoft said it was going to become a “Devices and Services” business, it meant it! 

Nokia is by a huge margin the leading maker of Windows Phone based devices which—as recent reports have begun to highlight—is actually outselling iPhone in certain markets, even though it has a long road ahead of it in the US, Europe, and in global market share.

Nokia has also been one of the last cheerleaders of the Windows RT platform, so I have to assume that between Microsoft and Nokia’s engineering teams, we’re going to be hearing a very good story for Surface devices in the next few weeks.  I’d anticipate the new Surface “2”, a new Surface Pro, and a smaller form-factor Surface, to compete against iPad mini and Kindle devices.

Even smaller devices—those things we still call “phones”—including the Lumia line and the remarkable Lumia “My crazy good camera can make calls and run apps” 1020—would now be “Made by Microsoft”, but Microsoft will be able to use the Nokia brand for awhile.

This sudden momentum in devices comes on the heels of a staggering report that there are 110 million users of Windows 8.  Not licenses.  Active users.  That’s 10 months after release, and it eclipses by almost 50% the entire install base of every version of Mac OSX.  Check out Paul Thurrott’s article for more on that report.

And on the “Services” side, Microsoft’s getting a lot of intellectual property and experience in the acquisition. It’s also getting Nokia’s patents, including its patent agreements with Qualcomm, and sweet licensing deals for Nokia’s astounding HERE services and platform.  For those of you not familiar with Here, it’s mapping and location services and—in my experience—it’s the best-of-class. 

Microsoft’s also licensing related technologies to Nokia, which I read as Bing-related technologies.  Bing and Here both have great strengths, and I think the two, put together, will give Google a real run for its money.

Glancing back at the “devices” part of the story, Here is being integrated more tightly into cars and other transportation—so there’s going to be some really interesting stuff moving forward in that space.

After the deal closes, Nokia will remain, and will focus on its other lines of business including Here, NSN (which provides network infrastructure and services), and its Advanced Technologies business, which handles intellectual property rights, research and development, and the like, for Nokia’s vast current and (presumably) future pool of patents.  Microsoft is providing 1.5 billion EUR in financing options for Nokia, to help it move forward successfully.

There’s a whole lot of leadership moving from Nokia to Microsoft, as well.  Keep your eyes on Stephen Elop, who steps aside as President and CEO, and resigns from the Nokia Board of Directors to become the Executive Vice President of Devices and Services.  My money’s on him to replace Ballmer.

So, just to provide some perspective:

  • Barely more than one year ago, Microsoft unveiled its new direction, software, and user interfaces, with XBox, Office 2013, Office 365, SharePoint, Azure, Windows 8, Windows Server 2012, Hyper-V, and the list goes on.
  • Less than one year ago, Microsoft launched Windows 8 and the Surface. While the road has been veryrocky and expensive, Windows 8 now crushes the entire install base of every version of Mac OSX.
  • In less than three years, the mobile phone market has morphed, with Android eclipsing iOS, and with Windows Phone actually outselling iOS in some markets.  Windows Phone 8—one year old—now claims the undisputed best device on the market for anyone interested in photos or video: the Lumia 1020.
  • With just a few weeks before the holiday season, and anticipated announcements of new Surface devices and new Windows RT devices from Nokia, Microsoft scoops up Nokia’s Devices & Services business, along with some fantastic patents, talent, and capabilities to produce and manage mobile devices.

Microsoft is not a perfect company, to be sure, but it is certainly an exciting and dynamic one.  Hats off to Ballmer—who certainly guided this deal to todays announcement—for perhaps the best ever post-resignation coup in business history.