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Summary:

Microsoft will join Google and Facebook — and show its commitment to Finland — by siting a data center in Europe’s frozen north. Also, the Nokia phone unit takeover talks have been on since February.

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Microsoft and Nokia held a press conference on Tuesday morning to discuss Microsoft’s takeover of Nokia’s phone hardware and services business. Naturally, several interesting details came out about the deal and its likely impact.

The first came from Nokia’s interim CEO, Risto Siilasmaa (Stephen Elop is back off to Microsoft, and is in the running for Steve Ballmer’s job). Siilasmaa said the two companies had been mulling over the deal since February this year – and Microsoft was the suitor:

“Nokia alone does not have the resources to fund the required acceleration across mobile phones and smart devices, especially as we have great opportunities in our other businesses as well… [Nokia's 32,000 transferring employees] will have stronger financial backing to be successful in the mobile marketplace.

“Finland becomes a core place for Microsoft in Europe. Instead of one Nokia there will be two global technology companies in Finland, both financially stronger and capable of investing in the future.”

Continuing on that theme, outgoing Microsoft CEO Steve Ballmer insisted that the transferring business would stay in Finland, much as Skype has stayed anchored in Estonia.

What’s more, Ballmer effectively unveiled Microsoft’s riposte to Google and Facebook, which have both recently moved to site new data centers in the chills of (very) northern Europe, Google in Finland and Facebook in Sweden. Here comes a sister to Microsoft’s existing Azure data center in Ireland:

“We are deeply committed to Finland [and can now announce] Finland as the home for a new data center for Microsoft that will serve customers around Europe… [It will cost] over $250 million in capital and operations over the next few years.”

There are several advantages to doing this: lower latency for European customers, better perceived compliance with European data protection laws (particularly as Europeans take fright at the surveillance implications of siting their data in the U.S.), and of course the cold external temperatures that can cut down on cooling costs inside the building.

All this will no doubt be a hot topic for discussion at our Structure:Europe conference in London in a couple weeks’ time.

Stephen Elop, who is now head of the devices unit that Microsoft is buying, also chipped in to talk about the “difficult decisions designed to improve our circumstances” that he made as Nokia CEO. He talked up Nokia Here, which is now the number two player in location-based services and also repeated what Microsoft said in its press release about Asha, the low-end Nokia brand that builds on what used to be called Series 40 for developing markets.

Actually, I think he was reading part of the press release out loud so, given that my note-taking fell behind, I’ll just copy that section in – it’s not received enough attention thus far:

“Microsoft will acquire the Asha brand and will license the Nokia brand for use with current Nokia mobile phone products. Nokia will continue to own and manage the Nokia brand. This element provides Microsoft with the opportunity to extend its service offerings to a far wider group around the world while allowing Nokia’s mobile phones to serve as an on-ramp to Windows Phone.”

Sounds to me like Asha is on its way out – it’s extremely unlikely that Microsoft will put much effort into developing a non-Windows platform further.

Finally, let’s return to what Siilasmaa said about patents and licensing, as this is a theme that will no doubt be of interest down the line. First off, Microsoft will “become a strategic licensee of Here… and will pay Nokia separately for this license.”

That’s as good an indicator as any of Here’s importance for Nokia, and of how lucrative it may become (existing customers already range from BMW and Mercedes Benz to Amazon and Yahoo). After all, the rest of Microsoft’s licensing of Nokia technology is included in the $7.17 billion price that’s attached to the overall takeover deal – Here is clearly a special case.

What’s more, Nokia is looking to expand its patent portfolio now, as Siilasmaa noted while talking about the company’s remaining Advanced Technologies unit:

“Nokia will continue to enable mobility through advanced research [in] mobility sensor and material technologies, and web and cloud technologies. At the same time we will continue to build our patent portfolio – we have around 10,000 patent families comprising around 30,000 patents and 1,200 patent families declared essential. We have a current annual IPR run rate of $500 million.”

Plenty to keep Nokia going, then. Now the company just needs to steer through the regulatory approval process and find a new CEO. I suspect it will be a Finn this time around.

  1. Jack N Fran Farrell Tuesday, September 3, 2013

    Massive data centers in the EU are a no-brainer for MS: the cloud is the future, EU demands EU data stay in EU for ‘privacy’, EU/US and dozens of tax-trolling nations stand ready to tax any movement of money out of the EU. Borrowing money from banks to pay dividends in the US is a gimmick that is more like using a long stick to poke a hornets nest: if you poke them, they will come… after you.

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