Nokia will continue to operate the Chennai plant, one of its largest manufacturing facilities, on a service contract for Microsoft. The factory started in 2006, more than a decade after Nokia's India operations began in 1995. (Agencies)
The Chennai plant employs about 8,000 workers, equivalent to about a third of Nokia's 25,000 staff that are being transferred to Microsoft, who will remain on the rolls of the Finnish firm. Nokia will offer a programme of support, including financial assistance, to help employees seek opportunities elsewhere.
According to analysts, the takeover of Nokia's handset business will enable Microsoft to become a major devices manufacturer.
Nokia shipped over 250 million units last year, second to Samsung's sales of 446.7 million handsets, according to IDC.
The acquisition also reiterates Microsoft's India-born CEO Satya Nadella's focus on "mobile-first, cloud-first world" as the Redmond (US)-based firm tries to restore the lost glory of a firm that was once the world's largest handset maker.
Nokia lost market share to Samsung and Apple as it struggled to position itself among the fast-changing needs of consumers.
The new firm -- Finnish entity Microsoft Mobile Oy -- will target the affordable mobile devices market, which it says is a USD 50 billion annual opportunity.
The Finnish handset maker expects the value of the transaction, which was completed after a month's delay, to be slightly higher than the earlier announced 5.44 billion euros (about USD 7.2 billion) after final adjustments based on the verified closing balance sheet, Nokia said in a statement.
The firm had agreed to sell almost all of its Devices and Services (D&S) business to Microsoft in September last year.
Nokia said the Chennai plant will manufacture devices for Microsoft under a service agreement. Nokia said the Chennai manufacturing facility is subject to an asset freeze by the Indian tax authorities as a result of ongoing tax proceedings.
"Consequently, the facility remains part of Nokia following the closing of the transaction. Nokia and Microsoft have entered into a service agreement whereby Nokia would produce mobile devices for Microsoft," it said.
The deal also excludes Nokia's plant in Masan, South Korea, which has about 200 employees and will be closed.
"Amid the uncertainty for our employees in Chennai and because of the planned closure of our facility in Masan, Nokia plans to offer a programme of support, including financial assistance, which would give our employees the chance to explore opportunities outside Nokia starting from a sound financial base,” firm added.
"The company plans to bring to Chennai and Masan elements of its Bridge program, which we have made available for employees affected by company changes in other sites," the firm said.
"Today we welcome the Nokia Devices and Services business to our family. The mobile capabilities and assets they bring will advance our transformation," Nadella said.
"Together with our partners, we remain focused on delivering innovation more rapidly in our mobile-first, cloud-first world," added Nadella.
Former Nokia President and CEO Stephen Elop will serve as Executive Vice President of Microsoft Devices Group and report to Nadella. Elop will oversee an expanded devices business that includes Lumia smartphones and tablets, Nokia mobile phones, Xbox hardware, Surface, Perceptive Pixel (PPI) products and accessories.
Microsoft will honour all Nokia customer warranties for existing devices, beginning on April 25.
On the amount of the transaction, Nokia said: "The estimate of adjustments made for net working capital and cash earnings was slightly positive for Nokia.
"...we currently expect the total transaction price to be slightly higher than the earlier-announced transaction price of EUR 5.44 billion after the final adjustments are made based on the verified closing balance sheet."
Microsoft said: "As with any multinational agreement of this size, scale and complexity, Microsoft and Nokia have made adjustments to the deal throughout the close preparation process."
“Microsoft will not acquire the factory in South Korea and the factory in Chennai will stay with Nokia due to the tax liens on Nokia's assets that prevent transfer,” it added.
Nokia said the convertible bonds issued by the firm to Microsoft after the transaction was announced in September 2013 have been redeemed and netted against the deal proceeds by the amount of principal and accrued interest.
Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen and Chris Weber have stepped down from the Nokia Leadership Team from today and till further notice, Nokia's interim governance model, announced on September 3, is in place.
Analysts are of the view that Nokia is a big brand in India and Microsoft would want to leverage it.
"Nokia has a strong portfolio of devices across price points...We hope that Microsoft will continue to play across the spectrum, both high and the low-end as far as prices are concerned," IDC Senior Market Analyst Manasi Yadav said.
They are expected to continue with the Asha range as it is very popular in India and other markets and also comes at affordable price points, she added.
"Microsoft would also continue to focus on smartphones. The prices of smartphones should come down and we could see a Lumia device in the Rs 6,500-10,000 range. India is a price-sensitive market," Yadav said.
Microsoft is expected to aggressively market its Windows platform after the completion of the deal, Gartner Principal Analyst Vishal Tripathi said.
"Microsoft has been in discussions with local OEMs for its Windows platform. That will only get more aggressive," he said.
Nokia, which had the tagline 'Connecting People', has been one of the most trusted brands in India, according to Nielsen consumer rankings.
According to reports, Nokia may name India-born Rajeev Suri as its next CEO and outline a new strategy focussed on network equipment business on April 29. Suri, 46, currently heads the telecom equipment business.
Nokia will continue to operate the Chennai plant, one of its largest manufacturing facilities, on a service contract for Microsoft. The factory started in 2006, more than a decade after Nokia's India operations began in 1995.