On Wednesday, Microsoft Corporation (NASDAQ: MSFT) announced that its Nokia-branded low-end phone business will be sold as part of a $350 million deal. The buyers are HMD, a new Finnish company, and FIH Mobile, a subsidiary of Chinese manufacturing giant Foxconn.
HMD and FIH will be manufacturing partners and, once the deal is close in the second half of 2016, they will take over Microsoft Mobile Vietnam and its Hanoi factory, The Investor reported.
According to Microsoft, nearly 4,500 of their employees will leave the company to be transferred to FIH and HMD, or at least they will have the opportunity to do so.
A Nokia representative affirmed that HMD will pay Microsoft $20 million for owning feature-phone brand and design rights, while FIH will pay $330 million for the manufacturing facility and the sales and distribution network. The deal will allow HMD to have exclusive rights for 10 years to sell Nokia-branded, Android-powered both phones and tablets.
In a statement, Nokia Technologies said the new deal’s intention is that one of the “world’s iconic mobile brands” (Nokia) and the “leading mobile operating system and app development community” (Android) join forces.
“We will be completely focused on creating a unified range of Nokia-branded mobile phones and tablets, which we know will resonate with consumers,” HMD CEO-to-be is Arto Nummela said in a statement.
Now that branding represents such a huge differentiator mark when it comes to mobile phones, this new business model is matching HMD extensive experience in sales and marketing with the unique asset of the Nokia brand, he explained.
Microsoft and Nokia’s partnership didn’t go as planned
According to the reports, Microsoft and Nokia have lost a lot of influence among consumers in the last decade, mostly because it’s been rough having to compete with rising giants as Apple, Google and their allies.
On Wednesday, IHS analysts, Ian Fogg and Daniel Gleeson, said in a research report that the decision of Microsoft of walking away from the feature phone business isn’t surprising. This new deal, they said, emphasized once more Microsoft’s continued failure in mobile. Actually, HIS also reported that in the first quarter Microsoft only shipped 2.3 million smartphones.
Microsoft assured that it will continue the developing of Windows smartphones, such as its Lumia devices, just as it will still support of party handsets from its multiples partners like Acer and VAIO.
Back in 2013, Microsoft acquired Nokia’s phone business with the intention to compete against Apple’s iPhone and Samsung, which embraced Google.