Nokia 2014 Annual Report Download - page 111

109
General facts
NOKIA IN 2014
Sale of the Devices & Services business to Microsoft
On September 3, 2013 Nokia announced that it had signed an
agreement to enter into a transaction whereby Nokia would sell to
Microsoft substantially all of its Devices & Services business including
the Mobile Phones and Smart Devices business units as well as an
industry-leading design team, operations including Nokia Devices &
Services production facilities, Devices & Services-related sales and
marketing activities, and related support functions, pursuant to Stock
and Asset Purchase Agreement by and between Nokia Corporation
andMicrosoft International Holdings B.V. dated September 2, 2013
(“Devices & Services Purchase Agreement”). Also, in conjunction with
the closing of the transaction, Nokia granted Microsoft a ten-year
non-exclusive license to its patents and patent applications at the
timeof the execution of the agreement and Microsoft granted Nokia
reciprocal rights to use Microsoft patents inHERE services, our
mapping and location services business. The announced purchase
price was EUR 5.44 billion, of which EUR 3.79 billion related to the
purchase of substantially all of the Devices & Services business,
andEUR 1.65 billion related to the ten-year mutual patent license
agreement and the option to extend this agreement in perpetuity.
Inaddition, Microsoft became a strategic licensee of the HERE
platform, and separately pays Nokia for a four-year license. On
November 19, 2013, Nokia’s shareholders conrmed and approved
the transaction at the Extraordinary General Meeting in Helsinki, with
over 99% of the votes cast in favor of the approval. Having received
the approval of Nokia shareholders and regulatory authorities as
wellas fullling other customary closing conditions, the transaction
closed on April 25, 2014.
Of the Devices & Services-related assets, Nokia’s former CTO
organization and Nokia patent portfolio remained within the Nokia
Group, which are currently part of the Nokia Technologies business.
The operations that were transferred to Microsoft generated
EUR 10.7 billion, or approximately 46%, of Nokia’s net sales for the
full year 2013, and in 2014 generated net sales of EUR 2.5 billion.
As is customary for transactions of this size, scale and complexity,
Nokia and Microsoft made certain adjustments to the scope of the
assets originally planned to transfer. These adjustments included
Nokia’s manufacturing facilities in Chennai in India and Masan in the
Republic of Korea not transferring to Microsoft.
In India, our manufacturing facility is subject to an asset freeze by the
Indian tax authorities as a result of ongoing tax proceedings. Microsoft
and Nokia agreed to a transfer service agreement whereby Nokia
would produce mobile devices for Microsoft, but this agreement was
terminated by Microsoft at the end of October 2014 and production
atthe site was suspended as of November 1, 2014. Nokia has called
onthe Indian government to lift the asset freeze so it can explore
potential opportunities for a sale to a suitable buyer. Refer also to
“Board review—Risk factors—Risks related to Nokia”.
In the Republic of Korea, Nokia and Microsoft agreed to exclude the
Masan facility from the scope of the transaction, and Nokia closed the
site in 2014.
Altogether, and accounting for these adjustments, approximately
25 000 employees transferred to Microsoft at the closing of the deal
on April 25, 2014.
Following the transaction, Nokia continues to own and maintain the
Nokia brand. Under the terms of the transaction, Microsoft received
aten-year license arrangement with Nokia to use the Nokia brand on
certain mobile phones products. Additionally, Nokia is restricted from
licensing the Nokia brand for use in connection with mobile device
sales for 30 months and from using the Nokia brand on Nokia’s own
mobile devices until December 31, 2015.
Following the closing of the transaction Nokia relocated its
headquarters to the Karaportti campus in Espoo, Finland.