Microsoft Corporation (MSFT) Deal Brings Nokia Back to Phone and Tablet Markets

Microsoft Corporation (MSFT)

Microsoft Corporation  on Wednesday said it agreed to sell its entry-level feature phone assets to FIH Mobile and Finland-based HMD Global Oy for $350 million. As a result of this deal, Nokia will return to the mobile phone and tablet markets.

Microsoft Corporation (MSFT)

Under the terms of the agreement, Microsoft will transfer all of its feature phone assets, including brands, software and services, care network and other assets, customer contracts, and critical supply agreements, to the two companies. Around 4,500 employees in Vietnam will transfer to or have an opportunity to join FIH Mobile or HMD Global, subject to compliance with local law.

FIH Mobile, a subsidiary of Hon Hai/Foxconn Technology Group, will also acquire Microsoft Mobile Vietnam, the company’s manufacturing facility in Hanoi, Vietnam.

The deal is expected to close in the second half of 2016, subject to regulatory approvals and other closing conditions.

Microsoft said it will continue to develop Windows 10 Mobile and support Lumia phones such as the Lumia 650, Lumia 950 and Lumia 950 XL, and phones from OEM partners like Acer, Alcatel, HP, Trinity and VAIO. Microsoft was rumored to be looking at launching 3 Windows Phone handsets in 2017. These will be marketed under the ‘Surface’ brand. Some more rumors have come up recently.

Microsoft Deal: Nokia Devices Returning To The Market

HMD Global Oy announced that it has conditionally agreed to acquire from Microsoft Corporation  the rights to use the Nokia brand on feature phones, and certain related design rights.

Under a strategic agreement covering branding rights and intellectual property licensing, Nokia will grant HMD Global an exclusive global license to create Nokia-branded mobile phones and tablets for the next ten years. Nokia will receive royalty payments from HMD for sales of Nokia-branded mobile products, covering both brand and intellectual property rights.

HMD Budgets $500 Million To Market Nokia Phones and Tablets

HMD is a newly-established company that will focus on Nokia-branded feature phones, smartphones and tablets. The company plans to invest more than $500 million over the next three years to globally market Nokia-branded mobile phones and tablets.

“Nokia-branded feature phones remain one of the most popular choices of mobile phone in many markets around the world today, and HMD will continue to market them as part of an integrated portfolio alongside a new range of smartphones and tablets. HMD’s new smartphone and tablet portfolio will be based on Android, uniting one of the world’s iconic mobile brands with the leading mobile operating system and app development community,” according to a statement.

HMD and Nokia have agreed to collaborate with FIH Mobile to build a global business for Nokia-branded mobile phones and tablets. Under an with agreement with FIH Mobile, HMD will receive full operational control of sales, marketing and distribution of Nokia-branded mobile phones and tablets.

Nokia will provide HMD with branding rights and cellular standard essential patent licenses in return for royalty payments. However, the company will not make a financial investment or holding equity in HMD. Nokia will be given a seat on the board of directors of HMD.

HMD will be led by Arto Nummela as a chief executive offer (CEO). The former Nokia executive is currently serving as the head of Microsoft’s Mobile Devices business for Greater Asia, Middle East and Africa, as well as Microsoft’s global Feature Phones business.

Florian Seiche will serve as HMD’s president. Seiche is currently senior vice president for Europe Sales and Marketing at Microsoft Mobile. He previously held key roles at Nokia, HTC and other global brands.

Shares of Microsoft Corporation are trading down 0.12% in the morning session.

Last week, Microsoft announced that it will close its China portal next month. The company provides a vast array of products and services in China such as cloud services and Windows 10. The company shut down its Chinese internet messaging service two years ago.

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