Microsoft acquires Nokia’s devices and services division: will Elop be the next CEO?

Nokia CEO Stephen Elop and Microsoft CEO Steve Ballmer announce plans for a broad strategic partnership to build a new global mobile ecosystem at a press conference in London, UK February 11, 2011. Nokia and Microsoft plan to form a broad strategic partne

In a somewhat sudden move, Microsoft announced today that they are going to acquire Nokia’s devices and services business for 5.44 billion EUR in cash. This move was predicted for a long time, but nobody was really sure when it was going to come.

The press release from Microsoft today said that “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” with this acquisition. In an email to internal staff, Steve Ballmer confirmed that the move sees Stephen Elop rejoin Microsoft as lead of the devices team, reporting directly to himself.

Microsoft confirmed that there would be a number of major staff changes internally, notably that Julie Larson-Green, who currently leads the Devices and Studios team will be focused on the launches of the Xbox One and “surface enhancements” this fall and will then join Elop’s team to help him make changes to the company.

In an open letter, Elop and Ballmer wrote that the “agreement will accelerate the momentum of Nokia’s devices and services, bringing the world’s most innovative smartphones to more people, while continuing to connect the next billion people with Nokia’s mobile phone portfolio. ”

The company also wrote that it expected most Nokia teams around the world to remain where they are going into the transition. Nokia is to officially join Microsoft in Q1, 2014 and 32,000 staff will move across to the company when the move is completed. The company will continue by changing it’s focus to three key areas: “NSN, a leader in network infrastructure and services; HERE, a leader in mapping and location services; and Advanced Technologies, a leader in technology development and licensing.”

Nokia also confirmed that Microsoft will acquire the Lumia brand, agreeing to a ten year license to use the Nokia brand on current mobile devices. Otherwise, Nokia will continue to “maintain and own” the brand, but the terms of the transaction dictate that the company will not be allowed to use their brand on their own mobile devices until December 31, 2015. The terms also say that if Microsoft does not honor the purchase, there is a $750 million penalty that would be required to be paid to them.

The move will certainly make an impact on the Windows Phone ecosystem – one would guess that most other OEM’s that are building Windows Phone’s are less likely to continue to release new handsets in the future, considering Nokia locks up around 90% of the Windows Phone market. That said, a post by Terry Myerson implies that the company doesn’t intend on going solo with Windows Phone and will still be working with other OEM partners.

Of course, the other logical conclusion to the sale is that Microsoft is acquiring Nokia for the devices division, their patents and CEO Stephen Elop. If you don’t know already, Elop was previously at Microsoft but left in late 2010 to join Nokia. Elop was referred to as a ‘trojan horse’ inside Nokia frequently after the company announced their strategic partnership with Microsoft back in 2011.  It was oft-rumored that Microsoft would make a play to purchase Nokia. The timing is impeccable too, considering that Ballmer announced his resignation just over a week ago and Elop was named by many publications as the most likely candidate to replace Steve Ballmer at the time.

The problem at the time was, of course, that Elop was running Nokia and that he was unlikely to leave his position there anytime soon. Now that Microsoft has acquired him and the company it’s looking like Elop eventually becoming Microsoft’s CEO could actually eventuate. It’s going to be an interesting year.