Microsoft sells Nokia phones business to Foxconn

Microsoft has sold its feature phone business to Foxconn subsidiary FIH and the newly-founded Finnish firm HMD global for $350 million (£242m).

The deal marks the latest stage in Microsoft’s troubled £4.6 billion takeover of Nokia’s devices business. Microsoft has struggled to make an impact in the smartphone market with Windows Phone and recently denied reports it was retreating from the market.

As part of the transaction, FIH will acquire Microsoft’s feature phone assets, including brands, software, services, customer support and contracts, as well as a manufacturing facility in Vietnam. The transaction is expected to close in the second half of 2016.

Nokia, which retained its technology and networks business following the Microsoft sale, has been preparing for a return to smartphones for some time, but through licensing agreements rather than direct manufacturing. Its name has already appeared on a number of tablets.

The company has reached a licensing agreement with HMD for it to use the Nokia brand on Android-powered smartphones, tablets and feature phones. Nokia will take no direct financial interest in HMD, but will instead provide standard essential patents (SEP) and ensure all devices carrying the iconic Finnish brand meet certain quality standards.

“Today marks the beginning of an exciting new chapter for the Nokia brand in an industry where Nokia remains a truly iconic name,” said Ramzi Haidamus, president of Nokia Technologies. “Instead of Nokia returning to manufacturing mobile phones itself, HMD plans to produce mobile phones and tablets that can leverage and grow the value of the Nokia brand in global markets.

“Working with HMD and FIH will let us participate in one of the largest consumer electronics markets in the world while staying true to our licensing business model.”

Microsoft has said it is still committed to Windows 10 mobile and is reportedly working on new smartphones running the platform. It has been suggested the first “Surface” phone could make its debut in 2017.

According to Kantar Worldpanel, Windows accounts for 6.2 percent of the UK smartphone market and 4.9 percent of sales in Europe’s five biggest countries.

@AntonySavvas