The cheap price tag of $7.17 billion may have attracted Microsoft CEO Steve Ballmer to buy Nokia phone business.

Besides, a lucrative smartphone patent portfolio which may be comparable with Google’s Motorola acquisition, has added value.

Microsoft will be competing directly with Google and Apple in coming years.

Microsoft, in a presentation, says intellectual property is an important element of the smart devices business. “Unless managed proactively, patent issues can create uncertainty for smartphone shipments. Unless managed creatively, patent royalties can add over 10 percent to costs of a smartphone bill of materials.”

Microsoft is acquiring over 8,500 design patents, ownership of the Lumia & Asha brands.

You may also read Steve Ballmer mail to Microsoft employees on Nokia devices acquisition

In addition, Microsoft will get a ten-year license to use the Nokia brand on feature phones.

Microsoft is paying €1.65 billion for a fully paid-up license to Nokia’s utility patents.

The deal covers all of Nokia’s patents and applications as of the closing date (except NSN).

The license price includes an option to convert coverage from a ten-year to a perpetual license.

The agreement provides for a broad, five-year, two-way standstill, including NSN.

Microsoft says that Nokia’s patent portfolio is one of the most valuable in the tech sector.

Nokia’s portfolio has approximately 30,000 utility patents and patent applications.

Microsoft considers it to be one of the two most valuable portfolios relevant to wireless connectivity.

The license also provides significant value for Microsoft’s existing businesses, replacing after 2014 Microsoft’s existing annual license payment to Nokia.

As part of the deal, Nokia is assigning to Microsoft benefits under more than60 patent licenses with third parties.

Nokia is assigning its existing license with Qualcomm, which is the other company that ranks with Nokia at the top in having a valuable wireless patent portfolio.

Nokia is also conveying rights under its agreements with IBM, Motorola Mobility, and Motorola Solutions.

These give Microsoft the benefit of attractive royalty arrangements Nokia negotiated.

Microsoft will combine the new Nokia license and these assignments with its existing patent agreements.

Microsoft’s agreement with Samsung will provide coverage for these additional devices without added payments.

Microsoft will benefit from its prior or continuing agreements with Apple, LG, Nortel, Kodak, and others at no additional cost.

The acquisition will promote competition, Microsoft said. Integration of hardware and software will help Microsoft offer competitive alternatives to Google and Apple.

Microsoft will gain proven capability and talent critical to success in devices and services.

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