Nokia has also entered into a mutual licensing agreement (the “Patent License
Agreement”) with Microsoft that will become effective upon consummation of the
Sale of the D&S Business and a payment to Nokia of EUR 1.55 billion, and, as
consideration for Microsoft’s unilateral right to extend the term of the Patent
License Agreement to perpetuity, an additional payment of EUR 100 million to
Nokia. Under the Patent License Agreement, Nokia will grant Microsoft a 10-year
license to certain of Nokia’s patents and Microsoft will grant Nokia reciprocal
rights to certain of Microsoft’s patents for use in Nokia’s HERE business. Upon
consummation of the Sale of the D&S Business, Microsoft will also become a
strategic licensee of the HERE location platform and will pay Nokia separately
for the services provided under this license. Microsoft is expected to become
one of the top three customers of HERE. Nokia will retain the Nokia brand and
all of its patents and patent applications worldwide, provided that certain
registered design rights that are specific to the D&S Business will be included
in the assets transferred to Microsoft.
The Sale of the D&S Business and the licensing arrangements described above are
expected to be significantly accretive to Nokia’s earnings as each of Nokia’s
continuing businesses, NSN, HERE and Advanced Technologies are global leaders
in enabling mobility in their respective areas. The Sale of the D&S Business
and the licensing arrangements described above are also expected to
significantly strengthen Nokia’s financial position and provide a solid basis
for future investment in the continuing businesses. During the first half of
2013, we estimate that the non-IFRS result of the business proposed to be sold,
“substantially all of Devices & Services business” would have been a loss of
EUR 395 million and net sales of that business would have been EUR 5.3 billion.
For the same period of time (on a pro forma basis) the non-IFRS result of
Nokia’s continuing businesses would have been a profit of EUR 436 million and
the net sales of Nokia’s continuing businesses would have been EUR 6.3 billion.
On a pro forma basis Nokia had EUR 12.8 billion of gross cash and EUR 7.5
billion of net cash at the end of the first half of 2013.
More information about the Sale of the D&S Business and the Purchase Agreement
is contained in the accompanying proxy materials, which we strongly encourage
you to read in their entirety. These proxy materials are also available on
Nokia’s website at www.nokia.com/gm.
After a thorough assessment of how to maximize shareholder value, including
considering a variety of strategic alternatives, Nokia’s Board of Directors
decided to approve Nokia’s entry into the Purchase Agreement and the Sale of
the D&S Business contemplated thereby and determined that Nokia’s entry into
the Purchase Agreement and the Sale of the D&S Business are in the best
interests of Nokia and our shareholders. The Board of Directors recommends that
Nokia shareholders vote to confirm and approve the Sale of the D&S Business at
the Extraordinary General Meeting.
The Purchase Agreement requires that shareholders representing a majority of
the votes cast at the Extraordinary General Meeting confirm and approve the
Sale of the D&S Business. The consummation of the Sale of the D&S Business is
also subject to the satisfaction of certain other conditions to consummation of
the Sale of the D&S Business as set forth in the Purchase Agreement and
described in the accompanying proxy materials.