Microsoft Deal With Nokia, What It Means

Added on by Arturo Gutierrez.

Wrote about the possibility of Microsoft acquiring Blackberry some weeks ago but the reality of that type of acquisition and what it could mean for Microsoft, mobile Industry, and the future of computing as a whole has just struck me as much more meaningful.  

Nokia, one time market leader (but isn't this the case for like, everyone?) is coming off a few years of some pretty reasonable innovative advancements in their smartphones (40 megapixel camera, beautiful hardware, Windows Phone partnership) that haven't exactly led to gains in share. Some of this may have be attributed to Windows Phone, which led to Microsoft absorbing 900MM from loses last quarter. I've never really felt it's for lack the WP being good, in fact I personally feel Windows Phone's Metro design is wonderful and intuitive. Apple seems to think so as well, it's new iOS 7 design has a flatter appearance in similar fashion as that of Windows Phone. But the Nokia partnership, which began in 2011, must have provided some indications to Microsoft that further integration in their mobile offering could lead to value by acquiring Nokia. What that value is may be of question, but I think there are a few things to note about this acquisition.

  1. Ownership over hardware design: End to end smartphone solution may equal better Windows Phone integration into hardware. 
  2. Strong Distribution to Support new hardware: Windows stores haven't exactly taken off, but the distribution partnerships that Microsoft has for Office, Windows, Xbox could be enough of an advantage to get their mobile hardware in more places. The launch of their own branded phone could be better controlled. 
  3. Enterprise! I'm sure a lot of IT professionals would love hardware that seamlessly integrates into their solutions. This acquisition could help.
  4. All those patents they are acquiring from Nokia. Have you seen the revenue that comes alone from patents? As of 2011 they were making well over 400 million a year from patents Android licenses alone.
  5. Keeping Investors happy: investors like companies that make smart moves, utilize their earnings to grow the company. And if the acquisition fails, at least Microsoft is trying to grow in a highly lucrative mobile environment. They have to. And making bold moves are required.  
via Gartner and CC. 

via Gartner and CC. 

So what does it mean for Android? Not much. I don't see signs of a slow down in sales, and with their market share, Microsoft would have to make sizable leaps (another acquisition, Blackberry perhaps?) in share to threaten or make any dent in the Android armor. For Apple? They aren't playing a market share game with Windows Phone...  at 3% share, Windows is so far behind it's hard to make the case for them being a credible threat. Even if they were to acquire Blackberry, whatever remains of Blackberry's 3.5% in 2012 wouldn't amount to much noise. 

 

- arturo gutierrez