Microsoft sells Nokia feature phone division to Foxconn for $350M

Microsoft's steady decline in the mobile phone business continues, as the Redmond, Wash., company announced on Wednesday that it will sell the feature phone division it acquired from Nokia to a subsidiary of manufacturer Foxconn for $350 million.

Foxconn's purchase was made in partnership with HMD Global, a new Finnish company that's been granted an "exclusive global license" to build Nokia-branded phones and tablets for the next 10 years. In short, the $350 million deal means that Nokia devices will once again return to the market.

Manufacturing, sales and distribution from Microsoft's feature phone business will be acquired by FIH Mobile Limited, a subsidiary of Foxconn. HMD and Nokia Technologies, then, will establish a "collaboration framework" for building new Nokia phones and tablets.

The sale — and subsequent plans for rebirth — of Nokia's feature phone business are the latest chapter in Microsoft's $7.2 billion purchase of Nokia's mobile phone operations from 2013. Microsoft had hoped the acquisition of Nokia could allow it to improve sales for its floundering Windows Phone division, but in the years since, market dominance by Apple's iPhone and devices running Google's Android has only grown.

Of course, Microsoft had little-to-no interest in the low-margin, shrinking feature phone business, so the sale of that division should come as no surprise. The company had announced internally in 2014 that it was planning to wind down the feature phone business over the course of the following 18 months.

As Windows Phone has floundered, Microsoft has focused on bringing its software and services to rival platforms, like Apple's iOS. For example, Microsoft's own Word Flow keyboard debuted on the iOS App Store last month, allowing for easier one-handed typing.

HMD said on Wednesday that the new agreement with Foxconn and Microsoft includes the right to use the Nokia brand on feature phones, as well as certain design-related rights. HMD plans to invest over $500 million over the next three years to support its Nokia-branded feature phones and tablets.

29 Comments

rob53 3312 comments · 13 Years

About 8 years ago

So Microsoft took an almost $7B hit on this purchase. How did Wall Street respond? They probably said it was a good deal.

lkrupp 10521 comments · 19 Years

rob53 said:

So Microsoft took an almost $7B hit on this purchase. How did Wall Street respond? They probably said it was a good deal.

As the article points out Microsoft only sold the feature phone (flip phones, non-smartphones) portion of the business, not the smartphone part. They will continue to make their branded smartphone. That being said it appears Microsoft will be doing the slow fade over the next decade, having missed out on the mobile revolution. They will have to evolve into something else. Services may be the next big growth thing, something Apple is also keenly aware of. Google and Amazon are the leaders in that market right now. Microsoft had better not fumble this time or they could be headed for the dustbin of tech history.

slprescott 759 comments · 10 Years

Isn't Foxconn's involvement a conflict-of-interest with their heavy involvement in iPhone assembly?

Or is it like the Samsung relationship: cooperate in one area (assembly) and compete in another area (finished products)? Or maybe it's not a COI because feature-phone are a different category than Apple's smartphones?

redstater 49 comments · 8 Years

rob53 said:

So Microsoft took an almost $7B hit on this purchase. How did Wall Street respond? They probably said it was a good deal.

And what response did you want Wall Street to have? It was evident that the deal was Ballmer's last parting gift for 2 years, and the new CEO finally wrote off the deal and laid off the Nokia employees last year, to his credit choosing to take the entire hit at once instead of spreading it over 2-3 quarters, and for that reason took a $3 billion operating loss for that quarter. As Microsoft has long since returned to profitability on the strength of their enterprise products - they have the #2 enterprise server OS, the #1 enterprise client OS by a wide margin, the #1 enterprise database, and are the #2 cloud platform as a service company with a big gap between them and #3, plus they have successfully remade the #1 enterprise and consumer productivity suite (again by a huge margin) into a web/cloud/mobile subscription service - how long did you want Wall Street to punish them for their failed attempt to be a hardware company, thinking that they would be as successful there as they were at one point with the XBox? And for what reason? Fewer consumers may be buying Windows desktops and laptops because they are getting mobile devices instead, but Microsoft is still the #1 software company in the world with $94 billion in revenue last year (which puts their $7 billion writeoff in context). The #2 software company? Oracle with $38 billion, and their revenue and profits have been in decline for years. SAP is #3 with $23 billion and no one else even reached $7 billion. Microsoft's $440 billion market capitalization is not only #1, but it is bigger than the market cap of the #2-#10 software companies combined. And for several of their products, no good viable substitutes or competition exists, especially for small to medium-sized enterprises that do not have a lot of IT expertise, and who need all of their enterprise products to work mostly out of the box with very little configuration and a lot of compatibility for that reason. Take Microsoft Office, SQL Server, Windows Server (and all the products that hang off it like corporate email, messaging, document and identity management) away and most of them would grind to a halt. That's why investors took Microsoft's decision not to try to be Sony or Samsung - let alone Apple - and go back to focusing on what made them the world's #1 company for a generation - software and services - as a good thing. A lot of Apple fans keep rooting for Microsoft's decline and death because Microsoft emulated Apple's PC UX/UI back in the day to create Windows. The problem with that is that Windows - while Microsoft's #1 product by far - is nowhere near their only product, and for many of their other products no one - including Apple - offers a good competitor for.

cali 3494 comments · 10 Years

slprescott said:
Isn't Foxconn's involvement a conflict-of-interest with their heavy involvement in iPhone assembly?

Or is it like the Samsung relationship: cooperate in one area (assembly) and compete in another area (finished products)? Or maybe it's not a COI because feature-phone are a different category than Apple's smartphones?

I was thinking the same thing they could be creeping into an Apple competitor. I also noticed the article mentioned "tablets".