The company continues to retreat from phone hardware, two years after the deal to buy Nokia’s handset business.
Microsoft is shedding one of the last assets it received in its troubled Nokia acquisition, selling the feature-phone unit to a subsidiary of Taiwanese hardware maker Foxconn.
Foxconn and a separate company created as part of the deal will pay $350 million to acquire Microsoft’s interests in basic mobile-phone production, including the Microsoft Mobile Vietnam unit and its massive Hanoi manufacturing facility.
About 4,500 Microsoft employees will transfer or have the opportunity to join the Foxconn or HMD Global, Microsoft says. A Microsoft spokesman declined to comment on the location of those employees.
The sale is the latest fallout from Microsoft’s purchase of Nokia’s phone assets two years ago. That deal, an effort to raise the profile of Microsoft phones in a market dominated by Apple and companies using Google’s operating system, failed to improve Microsoft’s standing in the critical smartphone market.
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Microsoft has spent much of the past two years winding down its Nokia assets, shuttering or selling factories in Europe, South America and Asia, and taking a $7.6 billion financial hit on the value of the acquisition.
Remaining with Microsoft were pieces of Nokia’s formerly massive global business of selling feature phones, or basic cellphones that can access the Web but lack the power and advanced features of smartphones.
Feature phones tend to be strong sellers in emerging economies, and among consumers reluctant to spend hundreds of dollars on smartphones.
Relying on Nokia’s strong feature-phone operation and nudging customers to low-end smartphones packed with Microsoft’s services was part of the company’s abortive bid to make a comeback in the phone-hardware business.
Wednesday’s deal will sell those units and all of Microsoft’s feature-phone software, customer relationships and branding to FIH Mobile, a subsidiary of Foxconn, the company whose formal name is Hon Hai Precision Industry Co. The transaction is expected to close during the second half of the year.
A newly created entity, HMD Global, will sell Nokia-branded mobile phones and tablets, licensing the Nokia brand name from the Finnish company, which retained the rights to its name on some products after the Microsoft sale. HMD, owned by a private equity fund managed by an ex-Nokia manager, will be led by Arto Nummela, previously the leader of Microsoft’s mobile devices business for Asia and Africa.
In a news release on the deal, Microsoft outlined its more limited aims in smartphones. The Redmond company will continue to develop Windows 10 smartphone software and support the three Microsoft-built devices carrying the Lumia brand that the company has released using the software.
The company didn’t mention any new phones.