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Microsoft sells Nokia feature phones business to Foxconn; startup buys rights for new Nokia devices

| May 19, 2016 08:20 AM EDT

Nokia 5110

Microsoft reported on May 18, Wednesday that it is selling its Nokia branding rights to a Finland startup company. This gives HMD global Oy the legal rights to produce Nokia smartphones and tablets for the next decade. This business move will provide Microsoft-owned Nokia Technologies with royalties from Nokia mobile devices.

The new Finnish company will have the rights to make Nokia phones. It is similar to the partnership between Microsoft and Nokia that provided the OS giant the rights to make Lumia phones.    

Microsoft is selling the remainder of its feature phone business to FIH Mobile Limited, which is also known as Foxconn. It will now handle the sales, distribution, and marketing of Nokia mobile phones and tablets, according to TechnoBuffalo.   

The maker of Windows operating systems will be paid $350 million for the deal. Taiwan-based Foxconn will become the owner of a feature phone factory in Hanoi, Vietnam as part of the deal.

In addition, the deal will result in around 4,500 employees switching companies. The agreement is scheduled to be completed before the end of this year.

HMD is owed by private equity firm Smart Connect. Its CEO Jean-Francois Baril worked at Nokia for 13 years as its chief procurement officer.   

HMD chief executive Arto Nummela said that branding is important to tell apart different mobile phones, which is why the startup is centered on the Nokia brand.  

Microsoft's Nokia handsets run on the Series 30+ operating system, according to BBC. The company will continue to produce and sell its Lumia Windows phones.  

Ian Fogg is a member of the IHS Technology research team. He shared that feature phones were never a part of Microsoft's business strategy when it purchased Nokia's mobile devices business.

Fogg noted that after Microsoft's reorganization last year the company wanted to get out of the feature phone business. It is likely it took the first good offer it received.   

The feature phone market is getting smaller. However, over 400 million units were shipped last year, and the Nokia brand is very strong in some markets.

Nokia was founded in 1865. That is when Fredrik Idestam built a pulp mill near the town of Tampere. The company's first mobile phone Mobira Cityman 900 was launched in 1987.  

Here's the Lumia 950/950 XL:

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