Behind the scenes of the Microsoft-Nokia deal

A couple of published reports on Sunday, reveal what happened behind the scenes of the Microsoft acquisition of Nokia. The impetus for the deal developed from a phone call from Microsoft CEO Steve Ballmer to Nokia Chairman Risto Siilasmaa. Ballmer indicated that both men needed to talk. That call took place in January. Three months later, Microsoft made a presentation to Nokia at a high powered New York City law firm. Siilasmaa's response was hardly encouraging. "We're on different planets," Siilasmaa said.

The 45 minute presentation also revealed that the two sides were not eye to eye on the pricing or the structure of a deal. For example, there was a question about who would own Nokia's mapping services. It was two months before, in February, when the two executives first met to discuss a possible acquisition of Nokia by Microsoft, and it was at this meeting that Ballmer said that innovation could come faster if Microsoft owned Nokia. Then there were the savings that could add up from ending the duplication of certain key departments, like advertising and promotion. A well received (and quite funny) ad for the Nokia Lumia 925 that showed a Wedding day fight between Apple iPhone and Android fans was actually produced by Microsoft, not Nokia. Why have two teams duplicating efforts, especially when Windows Phone was well behind iOS and Android. A focused, stronger team was needed to challenge the leaders.

Both sides also had concerns about contracts that were expiring. Nokia could have selected a new OS to team with at the end of 2014, while Microsoft could have signed with another handset manufacturer like HTC or BlackBerry. These possibilities were also part of the background of the deal. At a meeting in Finland in June, Microsoft committed itself to provide more financing to Nokia. During that meeting, Nokia made it clear that it would not part with HERE Maps, something that Microsoft had to deal with. During a meeting in New York the next month, Nokia agreed to give access to the mapping service's source code to Microsoft so that the latter firm could customize it anyway it wanted to. Nokia, in the meantime, would be able to license the mapping service to others if a deal was struck.

Eventually, a series of PowerPoint slides were created that outlined the terms of the deal. A September 3rd deadline was set for due diligence and for both sides to make a decision. Ballmer and his team flew to Finland on September 1st, and Nokia and Microsoft both agreed to the deal which was announced two days later.

source: NYTimes, AllThingsD via AAS