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The $7.2B deal will give Microsoft more control over the user experience for the Windows Phone OS
(Updated to reflect comment from Microsoft and Nokia)
Microsoft's deal to buy up Nokia’s devices and services business for $7.2 billion, and take control over the hardware on which its Windows Phone operating system appears, took a big step forward.
The Federal Trade Commission signed off on the deal, according to a filing published on Monday.
This is the second regulatory hurdle the deal has clear in the last couple of weeks. On November 19, the deal was approved by a majority of Nokia shareholders.
Next, since Nokia is a Finnish company, the deal must be approved by the European Union, which has until this Wednesday, December 4, to make its decision on whether to clear it.
"We look forward to the date when our partners at Nokia will become members of the Microsoft family, and are pleased that the Department of Justice has cleared the deal unconditionally," a Microsoft spokesperson said in a statement to VatorNews.
"As is common with transactions of this global scope, regulatory and other approvals are required in a number of countries. So far, we have clearance from regulators in Brazil, India, Israel, Russia, Turkey and the US and we continue to seek approvals in the EU and 11 further countries including China," said a Nokia spokesperson.
"We’re still anticipating that the transaction will close, subject to these regulatory approvals and other closing conditions, in the first quarter of 2014."
The deal, which will be worth €5.44 billion, or $7.2 billion, was first announced in September. It breaks down to €3.79 billion for Nokia’s devices and services, and €1.65 billion to license Nokia’s patents. All of the money spend will be in cash and Microsoft will draw on its overseas cash reserves to finance the transaction.
The deal is expected to be finalized in the first quarter of 2014.
This is extremely important for Microsoft's smartphone business going forward, because what the deal really does is give Microsoft greater control over the hardware on which users will get to experience the Windows Phone operating system.
When the deal was first announced, Microsoft explained that the acquisition will do a number of things.
It is meant to protect the Windows Phone future because first-party hardware will ensure Windows Phone’s ongoing presence. The acquisition will also remove friction going forward and will allow Windows Phone to innovate more quickly and see more efficient marketing. The acquisition is also meant to grow Microsoft’s OEM opportunity.
The Windows Phone OS has seen remarkable gains over the past year. As BlackBerry has crumbled, it has left a big hole in the market, one that Microsoft was able to capitalize on. It has now secured its place as the number three OS, behind iOS and Android.
Windows Phone actually grew 156% year-to-year, going from 3.7 million to 9.5 million, according to data from the International Data Corporation (IDC) released last month. And its market share also increased significantly, as well, going from 2% to 3.6%.
Nokia, the IDC said, accounted for 93.2% of all Windows Phone smartphones.
Microsoft, which had been exclusively a software company for decades, recently underwent a massive reorganization, and a big part of that was a new focus on the hardware side of the business and to give users a more consistent experience.
"About a year ago, we embarked on a new strategy to realize our vision, opening the devices and services chapter for Microsoft. We made important strides — launching Windows 8 and Surface, moving to continuous product cycles, bringing a consistent user interface to PCs, tablets, phones and Xbox — but we have much more to do," Microsoft CEO Steve Ballmer said at the time.
"Going forward, our strategy will focus on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most."
Getting their hands on Nokia's devices and patents will be a big step forward for a company that is already making big strides in the smartphone sector.
Nokia has seen €17.2 billion in net sales in the first three quarters of 2013. The company had €30 billion in net sales for the full year 2012.
It reached its peak revenue in Q4 2012, with €8 billion in net sales.
ZDNet first reported this news on Monday.
(Image source: https://business.financialpost.com)
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