For MS, Nokia deal was arduous

By buying Nokia’s handset business, Microsoft may have strengthened its control over the destiny of its mobile operations and gained a potential new chief executive.

But completing the $7.2 billion transaction, the technology giant’s second-biggest after the acquisition of Skype, was a lengthy process that was anything but straightforward, people briefed on the matter said on Tuesday.

Steven A Ballmer, Microsoft’s chief executive, first approached Nokia about a deal during the Mobile World Congress industry conference in Barcelona this year. He emphasised to Stephen A Elop, his counterpart at Nokia since 2010, that the software company needed to continue its hardware evolution by developing smaller handsets. Integrating hardware and software, in the mould of Apple, was an important priority. But Microsoft also wanted to ensure that Elop, a former executive, would come along as part of the deal. Nokia at that point felt that Elop was compromised and arranged for Riisto Siilasmaa, the Finnish company’s chairman, to take over negotiations. Still, the prospect of Nokia shedding its core business – the longtime pride of Finland – weighed heavily on the company. But the board sought to maximize value for shareholders, rather than letting pure nationalism govern its decisions. Over all, Nokia’s directors met around 50 times in person to discuss virtually every angle of the deal, from valuation to the potential impact on the handset unit’s 32,000 workers.

Much of the discussions were held directly between Mr. Ballmer and Mr. Siilasmaa, who met discreetly in Helsinki, London, New York and Seattle, among other cities. The negotiations featured a disparity of styles. Ballmer was his famously demonstrative and energetic self, while Siilasmaa was more reserved and polite.

The talks moved deliberately, with both sides taking time to figure out how the new structure would work and figure out how to unravel the commercial agreements.

This summer, talks between the two sides cooled, as the complexities of the transaction took a toll. They resumed in July, with a broad agreement on the principles of the transaction reached by the end of that month.