Microsoft + Nokia = Microsokia?
Computer giant Microsoft today announced a deal to acquire Nokia’s mobile phone business. It is thought the deal is to be worth in excess of $7 billion and includes both their mobile phone manufacturing unit and licensing on their patents.
Over the past few years the iconic Finnish company have experienced financial difficulty, in stark contrast to just over a decade ago where they were the monopoly in the handheld telephone industry. To put their plummet into context their market share in 2007 was almost 50%, yet in the first half of this year it was a measly 3%. Many have cited different reasons for this decline varying from complacency, poor development of their operating system, to the incredible work and impact of Steve Jobs at Apple and the rapid emergence of Samsung. It’s a pretty sad story for a firm that not so long ago produced a good that was found nestled in the trouser pockets / handbags of millions of people around the globe. It’s even worse for shareholders in the Finnish firm who have seen the share price drop 93% since its 2000 level, albeit seeing a 40% rise in recent days in response to this news.
Here are some finer details of the deal:
In total, the deal is rumoured to be worth around $7.2 billion, to be completed in early 2014
It is said 32,000 Nokia employees will transfer to Microsoft
Nokia chief executive Stephen Elop, who previously served as an executive at Microsoft, will once again join the software giant, heading up the phone-making division that Microsoft just bought.
Nokia will retain its patent portfolio, but will give Microsoft a 10-year license to its patents at the time of the deal closing.
I personally think this is good deal that will potentially, and hopefully, shake up the mobile phone market. Saying that, both Microsoft and Nokia have struggled to make an impact individually with Google, Apple and Samsung dictating the industry of late, and there are no guarantees this acquisition will change anything to challenge this stronghold.
Those at Nokia state that this deal will allow them to explore other tech ventures and to expand their presence in these fields. On the other hand, in acquiring Nokia, Microsoft can now gain valuable insight into mobile phone production as opposed to specialising in just operating software. The deal will allow Microsoft to tap into Nokia’s specialist product managers, as well as providing them with the ownership of their patents for the distant future. Economies if scale produced by factors such as this should see more cost efficient and technologically advanced products being launched into the market. As a consumer, one can only hope this will lead to more competitive prices and better quality products across the board.
This was simply a move Microsoft had to take. With mobile use becoming more widespread (in particular in emerging markets where Nokia has held great influence), it was only a matter of time before Microsoft made a move into the lucrative market.