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Nokia's Chennai factory will be excluded from sale to Microsoft

With rumors of what would happen to the Nokia's Chennai factory swirling about since mid-March there's now some official news on the matter. The Chennai factory, which is viewed as a key manufacturing asset for Nokia, will be excluded from the sale of Nokia to Microsoft due to the tax concerns with the Indian government.

"We are leaving out the plant because of the tax issues," Poonam Kaul, a Nokia India spokeswoman, said by telephone today. The plant, one of the Espoo, Finland-based company's largest phone factories, will make products for Microsoft as part of a servicing agreement, according to Kaul.

Nokia strongly believes its offer to the Indian tax department is fair, Brett Young, a spokesman for the company, said at the time. The company is offering a voluntary retirement plan to workers at the plant near the southern Indian city of Chennai, according to Kaul.

With that part mostly take caren of, all things are still a go for completion of the Nokia sale to Microsoft on April 25th. For how long the plant will continue to be used as part of the servicing agreement though remains to be seen.

Source: Bloomberg - Thanks, Zapella T!

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Reader comments

Nokia's Chennai factory will be excluded from sale to Microsoft

122 Comments

Live up in India .. A court matter struggles for so many years but still no solution...
Govt. Should have kept In mind regarding unemployment issue so many ppl getting unemployed ..
Really a bad decision :|

Sorry mate... that government of India is teh shit. Do you know they are asking F1 to pay taxes on the value of the cars and equipment that enter the country JUST to participate in the grand prix?  That is why the Indian F1 race is being abandoned. IKEA is for so many years facing similar issues, and so do major western farmaceuticals.

They are often extorting big western companies and organizations. They don't do it every day... but simply wait for an opportunity to arise. On one hand it is ok, because big companies also exploit India, but on the other, it is still extortion.

For a second I thought Nokia was keeping the plant... Looks like they're shutting it down. So who is India going to extort now??? Jk
I have nothing against the Indian government but its kinda sad that they weren't able to work things out.

Hopefully they discover that this tipsters off extortion will stop working. Companies have to many options.

Yes, there's the chance they'll lose (course spelling) jobs, but what does that have to do with IT? Try taxing authorities and courts.

IT there meant Income Tax dept...they are equally corrupt as politicians. Courts rule out as presented to them, its IT dept who runs with politics and targets from whom they can grab some bribe.

Ah, that makes more sense. Here, IT is Information Technology. ;)

Oh, and it's fixed now, but my post shouldn't have said teaching authorities. It should have said Taxing authorities. Word Flow isn't perfect. ;)

It is not owned by Microsoft...it is instead owned by a phone company that soon won't sell phones.
The factory is in limbo...and you can bet that Microsoft will not buy it from Nokia if the opportunity presents itself.
Indian Government are being fools...and making their country very unattractive to outside investors.
Foolish

India who seem to have problems with economy and exports should be more clear about taxes for companies and not scare them away with surprise taxes...

2016 isn't that far away. Also, Nokia is keeping a factory in Korea too. But whatever Nokia does in the future, I would just close the India factory and move elsewhere. India is clearly not a good place to put factories in despite the cheap labour.

Ofcourse the govt is corrupted, which I am not gonna argue about. But, India has always been a friend to factories and it still is. But, that doesn't mean that India should overlook violations of a national aggreement. My heart goes out to every party involved, but if they are going to go forward with a private deal, it is only legal  they settle what has to be settled.

Considering the entire thing is tied up in a huge tax scandal?  I'm still wondering how they managed to change teh fine by hundreds of millions every time.  I'll be surprised if Nokia holds on to this factory to make anything in the future.  They'd probably be better of using Foxconn or some other OEM. 

You really need the explanation after all this?
Wise man once said, you can wake the sleeping, but can't wake the pretending to sleep.

India won't let them sell it to anyone until the bill is paid. HTC has money problems of its own. Only ones who might be interested are companies with a stash of offshore money.

Not sure how that affects HTC though. I know American companies aren't taxed on theirs. But Considering how much they paid Robert Downey Jr. I wouldn't put it past them to buy a plant in a corrupt country who just screwed its last tenants.

There are always ways around the intrusive and abusive government regulations. What business can't buy its way out of it will circumvent with legal maneuvers as long as the potential for profit exist... .then it will leave you high and dry by abandoning the area because you screwed them over once too often.

Yea since in the agreement to sell it excludes Nokia from manufacturing phones for a few years... Selling this to HTC might be wise, or MSFT just goes in and buys it when all said and done...

They wouldn't be selling phones. They would be making phones on contract to Microsoft, as the article states.

Nokia fanboys will NOT buy Microsoft anything. ;P

By the way...Currently many of the Lumias (at least the ones I own) are produced in China by Foxconn...not by Nokia itself. So I don't really see your point.

I think it may just be your phones. I think on Nokia's website, it says that most of their phones are made "in-house" (they even employ the damn miners for mineral extraction) so unless they're just fudging the truth, I took that to mean that the factories that they own make most of the phones.

Well, they say made in China and Nokia's factories in China are the FoxConn ones. Now...it *may* be possible that the phones shipped to one Europe aren't produced by the same factory that does the ones that ship the American models. I honestly don't know.

Honestly, enough with it already. Just close the factory, fire the employees, leave India, move to another country and be done with it.

Nokia is being way too nice of a Corporation. I'm pretty sure Microsoft, in their position, would have closed doors already. Just close it down.

It sucks for the people who will lose their jobs, but they can go thank their government later.

The problem is that the Indian government is trying to extort undue taxes that they came up with after violation an international treaty with Finland. That's the problem.

Undue taxes? Are you saying that Nokia can't afford a lawyer who can tell the Indian Govt that they violated the International treaty. Admit it, Nokia owes taxes to Indian Govt.

You think that hiring a lawyer and telling a government something makes it a done deal?  Nokia obviously has lawyers on staff and they have already argued their side of the story.  India has a different opinion on the matter.  It will have to be decided in court.  I'm not sure why you think the Indian government is automatically right and Nokia is automatically wrong. 

You clearly have no idea how these things work. You, as a Nokia lawyer, present your complaint. Then the lawyers next to the Indian government, counter-argue. And then these things go back and forth. And in some cases, if the thing gets really out of hand, other governments get involved.

There's nothing to admit. Nokia doesn't own anything. This is just a case of corruption and greed from the Indian government. It's attempted extortion by a government. And Nokia isn't the only one being a target.

You clearly are blinded by your swirling hatred of India. My oh my, how I wonder what we did to you :D Just kidding, ofcourse.

Do you know of all the tax scams by other multinational companies such as Apple in other countries such as Italy or the USA? These firms do it all the way. They manipulate and evade. This is not so much big of an amount, speaking on a national fiscal, that you have to say that Indian government is greedy. lol. But, not so low as to overlook.

I think the same way you do. All of the corporations do it... But I don't know enough about this particular event to judge yet. Most people seem to be on Nokia's side, here of course. But again. Idk...

-- Bam --

Most people here are on Nokia's side, because their love for Nokia products has blinded their judgement. Plus, I think they hate India :D

Sad :( Foreigners hate India for this, without knowing the issue full well. At least, not us, citizens.

I do hate our govt for many other reasons, but not this one. These MNCs are greedy. They get every facility laid out for em and they can adhere to agreements and tax laws. If not, they should pay :/ 

Corruption all the way. Nokia offered to put a cash deposit for release of the factory. Indian goverment would have agreed, with a condition that Nokia has no right to appeal anymore in any court.. Basically making them admit guilt and pay...
This is a robbery attempt, close the doors, kick everyone out and let the goverment deal with their own mess!
This mess is also restricted to Nokia India, so liability stops there!

I agree. I am indian. I dont agree with these the current government is doing.. I think they willl be wiped out in the elections.. so after that i think Nokia may be hoping to transfer assuming the tax is reasonable. Or else close shop and get out of there.. 

I'm not buying a "Microsoft Phone" or whatever it'll be called... I want a Lumia!
If Lumias are not going to be manufactured by Nokia, this'll probably be my last Windows Phone...

Nokia employees will still be designing the phones because MSFT bought them, and they will still name it Lumia.

Just no more Nokia logos on it but in its essence its all the same.

By that logic, so would a Jolla be a Nokia.

It's designed and made by ex-Nokia employees, in a company funded by Nokia, and uses an OS Nokia helped create.

Actually, scrap that. There's more Nokia on a Jolla than there will be on a Microsoft produced phone.

 

No, Microsoft phones will NOT be Nokia phones. First, not only not all the employees accepted to move but the one that designed the most famous Lumias left Nokia the day after the deal (since you talked about design).

Having ex-Nokia employees making the phones will NOT make those phones a Nokia. There are ex-Nokia employees working for Apple, HTC, Samsung, Sony, Alcatel etc. It doesn't make those phones a Nokia just like it won't make anything Microsoft produces a Nokia.

It's not a few Nokia employess. It's all of them that were designing and manufacturing the phone before. Plus the division will stay in Finland. So, they don't have to move. Some people will chose to leave as always happens when a company is purchased. Most will stay.

It will be Microsoft Lumia and they will be made by the same people. They will be backed up by a hell of a lot more money though. I'm not happy about this either, but I'm not going to punish myself by not getting the phone I want, simply because of a name. Who knows, maybe these Finns will be able to build even more awesome hardware now that they have the financial backing of MS.

Microsoft would be VERY unwise to drop the brand Lumia, as it accounts for a very-high percentage of Windows Phones sold over the world. :)

That percentage is sold thanks to the "Nokia" brand, not the "Lumia" brand. And the "Nokia" brand they'll be forced to drop because they weren't wise enough to try to license it at least until 2016.

No, they are not. Stop being ignorant.

They HAVE to drop it on smartphones because they DON'T own a license to it. The license they have in the deal only covers S30 and S40 based phones. Go read the freaking deal.

Nokia brand is big in dumb phones and they did license it for dumb phones. The Nokia brand hasn't really been that good for smartphones.

And yet, it's the only thing that made WP grow. Imagine what would be of WP without that not that good brand on smartphones.

If WP sold on the virtues of the OS, Samsung and HTC phones would sell as well if not better than Nokia Lumias. Yet, they don't.
 

You are not the only one. The Nokia L930 will be my last Windows Phone unless Sony steps in.

And I'm not even sold on the L930 because of the lack of a microSD expansion slot and the fact that for some stupid reason I can't opt to use only 2 columns of Live Tiles on that phone (yet I'm allowed to jam a 3rd column on the 920).

 

The only thing I'm sure: I'm not buying a Microsoft produced phone. Specially not a travesty of a phone pretending to be a Nokia when it isn't. I'll gladly stay with Windows Phone but only if another good OEM (aka Sony) steps in. And that OEM isn't Microsoft for sure.

Go ask Sony.

However, since I'll still be using at least my 1020 as a camera, I won't be going anywhere. And if I end up getting the 930 at least I'll be sticking with it until the end of 2015. So, at best, you can pray for Nokia to return to phones in 2016.
But while you wait...you could go read the deal between Microsoft and Nokia for the sale of the D&S division...it would do you good ;)

Why? Is there something wrong with the surface or any other piece of hardware they make? They make pretty solid, well built hardware. If it's just because of the name, then you are being very illogical.

Yeah but avg consumer doesn't think all of that while buying. When he wants he just wants Nokia. The brand name has won hearts across the globe with the tuffness f the phone. So not keeping the name Nokia maybe dangerous becoz the name itself carries so much reputation.

Well, considering I've had problems with their hardware before and had to replace a Surface and a type cover already after only 6 months, yeah, there's a problem with Microsoft's hardware. Never any other brand gave me so much problems with hardware as Microsoft. And I use a few (Asus, Sony, LG and obviously Nokia).

So yeah, as far as I'm concerned, Microsoft isn't a good OEM.

you've been saying that for months now, so why dont you just leave? And the phone you're critisizing was made by your beloved Nokia (big, bulky, lacking sd card), yet you blame microsoft. maybe if microsoft was making the phones from the start, they wouldn't be big, bulky, lacking SD! like i said, for an attorney, you're not very smart; you wont even keep your word and leave after months of posting in this forum that you were going android on a Sony device.

You clearly can't read very well. Or at all.
1st - I won't leave just to please you. Actually, just to piss you off, I think I'll stay even if my entire ecosystem changes to something completely different.

2nd - Where did you got the "big, bulky"? Your imagination, clearly. Do I prefer smaller devices? Yes. Is the size of the 930 a deal breaker? No. And the "bulk" most definitely isn't. I am not among those sissies that whinned about the 920 bulky size. On the contrary, I still prefer the 920 to the 925.

3 - Lack of a microSD, yes. I criticize. But again, only in your drug-induced imagination did I blamed Microsoft for it.

4 - Also, a lawyer doesn't have to keep his word. But at any rate, I've always clearly stated that I would stay with Nokia until the end. Perhaps you need more English classes to understand what "until the end" means.

And yes, I will go to a Sony Android device. A Z2 Compact when they announce it. But only if Sony doesn't release a WP version of the Z2 Compact (or even the Z2). And you know why? Because meanwhile Google fucked up Android 4.4.2 and removed the ability to save apps to the microSD card. Which means, Android flagships just lost the thing they had that placed them above WP to me: expandable storage. And guess what? WP has it. So, if Sony releases a Z2 Compact or alike with WP, I'm staying with WP.

 

So if you want to see me gone, follow these instructions: pick up a figure of the Virgin Mary, light a candle to Her and ask Her for her to either make Google reverse those changes in Android 4.4.3 or ask Sony to release the Z2 Compact with 64GB of internal storage.

But She probably won't listen to your anyway, so...too bad for you.

First off, I don't drinks, smoke, or do drugs of any kind; second us Catholics don't worship the Virgin Mary, if you knew anything, you would know that when we pray the rosary, we focus on the life, death and resurrection of our lord and savior Jesus Christ. So essentially, its the life of Christ seen through the eyes of his mother.......also known as an eye witness to the sacrifice he made for the world. The merits mystries are as follows:

1. Joyful: Focusing on the announcement the she would give birth to the savior, presenting him in the temple, and early years of his ministry

2. Sorrowful: His crucifixion, being arrested, beating, casting lots for his garments, crowning with thorns and eventual being crucified on the cross.

3. Glorious: His resurrection from the dead, appearance to the disciples, and ascension into heaven to be seated at the right hand of the father.

Where in what I've explained above points to, "Us Catholics" do we worship the Virgin Mary? Unlike most of the world, we take the time to remember the sacrifice Jesus Christ made for us so as not to become complacent falling into a life of sinfulness like most of the world has already fallen into. I'm proud to be Catholic and say the rosary.

Aw… Poor Indians. Most of our mobile enthusiasts are from that country. And I love their movie Three Idiots.

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I read somewhere that HTC was planning on buying that factory. Does anyone have any word if that's true?

I don't understand.  The part of Nokia that is not sold to Microsoft cannot make handsets or tablets.  So, this factory is useless to them.  It will likely be shut down if it doesn't transfer to Microsoft.  This is a real bone-headed move by the India government.  Of course, the U.S. government makes plenty of bone-headed decisions as well. 

Actually, Nokia will only be prevented to release their own mobile devices until 2016 and "mobile devices" can be interpreted as "phones" only. Not tablets. Though, of course, they'll obviously not produce tablets either. However, nothing prevents Nokia from releasing, for example, smartwatches. So that alone could explain the maintnance of the Korean factory along with this one ;)

And then, 2016 isn't that far away. They can give good use to the factory. However, if I was anyone in charge of Nokia, this factory would be to close down. Nokia would be out of India by the end of May.

I'm still hopeful Microsoft can sort this out after the sale is complete.

The Indian Gov't kept screwing over Nokia and look who loses, the employees.

My question is again and again. India wants 500 Million in back taxes. Why MSFT just don't give them what they want. It is a small bailout for Nokia and MSFT can continue business as usual in India. This is a big lost for MSFT.

India is showing alot of love. Not worth losing that love for a miserable 500 million dollars.

Yeah sure becuase msft is prvate company and does not have shareholders. But nokia could put their 7billion to use since its their debt.

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Understood but bill Gates can give away 30 billion away to charity. Something's don't make sense. MSFT can easily fix this very easily and keep the flow moving. Where is Satya when MSFT needs him?

The Indian government is not a charity organisation. Why should Bill Gates pay a cent to line the pockets of corrupt politicians? That would be considered to some people as bribery. It does not matter if the amount is 500 million or 5 million, Microsoft must not let itself become a victim of extortion or otherwise every country would start exploiting the deep pockets of Microsoft. If you pay ransom to one kidnapping, there will be more kidnappings. If it's so easy to exhort money from MS, everyone would start doing it. The sooner this Indian government get's voted out, then there may still be a chance that the factory can be saved when Nokia + MS negotiates fairer terms with the new government. If this government stays, I bet Nokia will announce the closure of the factory the day after the election.

Why should Microsoft have to pay anything.  Not their debt in any shape of form.  How about the Indian people spend the money.  That would be around about 25 cents (or 15.25 IR)  per citizen right?  

Just curious, as this factory was part of the original purhasing agreement does this mean Microsoft total payment for the Nokia division will be less overall or is Microsoft eating the cost or are they getting something else in return if they don't get the factory? 

If that factory won't be there then Microsoft won't be able to segment their phones widely as Nokia did. So its better Microsoft buys it otherwise they wont be able to do distribution of smartphones among the country properly thereby increasing prices.

Indian government is filled with coruption.  The Indian officials just want to get a pay off!  It even more corupt then the Chineses.