Microsoft announced on Tuesday that it will be purchasing Nokia’s devices and services business. Microsoft is paying $7.2 billion to purchase all of Nokia’s cell phone business and related licensing patents. The Press release reads:
“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services,” said Steve Ballmer, Microsoft chief executive officer. “In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution.”
Aside from the fact that the two firms have a long-standing relationship, Nokia has been the premier manufacturer of Windows Phone hardware, and has seen strong success in recent quarters with its Lumia handsets. Microsoft must be keen to start manufacturing their own SmartPhones after they took a nearly $1 billion hit last quarter due to unsold Surface inventory. The already existing relationship between the two firms make this deal a little less ground breaking than it could have been 10 years ago. The general consensus seem to be that little will change for Microsoft’s mobile devices going forward. At least for the newt few years.
Here’s a couple of facts regarding this billion dollar deal:
- Microsoft stock dropped by more than 5% in early trading following the acquisition announcement.
- Nokia investors seemed to cheer the deal sending the stock up by more than 40%.
- Microsoft will get 8,500 design patents and rights to the Asha and Lumia brands, as well as a 10-year license to use the Nokia brand on feature phones
- 20% of Nokia’s market share decline occurred after the Feb. 11, 2011, announcement that the company would be entering a strategic partnership with Microsoft. This is not to say the partnership itself is to blame, rather that the two companies are yet to see success together.
- Microsoft is aligning themselves with a strategy that Apple has held since the beginning, that is an admission that Apple’s approach in mobile to own the hardware, software and services around its devices, is the best one.
The Microsoft Nokia Deal:
Buying Nokia’s device business isn’t a genius move. In fact, it’s incredibly obvious — but at least it puts Microsoft on par with the other major mobile platforms. That’s a good thing for Windows Phone.