Nokia completes deal with Microsoft sans Chennai plant

Finland's Nokia today said it had closed the sale of its once-dominant handset business to Microsoft Corp after the companies agreed to leave two factories – including the controversial one in Chennai, India and another in South Korea - out of the deal.

The company said in a statement from Helsinki that it now expected the final sale price to rise slightly above the previously announced €5.44 billion ($7.52 billion).

Nokia said that due to an ongoing tax dispute with Indian authorities, it would operate the Chennai factory as a contract manufacturing unit for Microsoft. It also said it will completely close a plant in Masan, Korea, which has about 200 staff.

Nokia added its board of directors was due to meet early next week in relation to the company's strategy assessment.

Media reports today said Nokia would outline its new strategy on Tuesday along with its first-quarter results, and that it would also nominate Rajeev Suri, the head of Nokia Siemens Network, as the new group chief executive officer.

Nokia had last September agreed to sell almost all of its Devices and Services (D&S) business to Microsoft (See: Microsoft to acquire Nokia's handset business for $7.1 bn).

Welcoming the completion of the deal, Microsoft chief executive officer Satya Nadella reiterated the focus his Redmond-headquartered company on a "mobile-first, cloud-first world," according to a statement from the US company.

"With the Nokia mobile phone business, Microsoft will target the affordable mobile devices market, a $50-billion annual opportunity," it said.

Nokia added, "In India, our 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.

"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.

"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," Nokia added.

Microsoft will honour all Nokia customer warranties for existing devices, beginning today. It will absorb about 25,000 employees, who will be transferred globally from Nokia.

Convertible bonds issued by Nokia to Microsoft after the transaction was announced have been redeemed and netted against the deal proceeds by the amount of principal and accrued interest, Nokia said.

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 3 September is in place.

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.