September 2, 2013, Microsoft made an announcement that it will acquire Nokia. Microsoft will pay Nokia $5 billion for its business segment responsible for making phones and another $2 billion for licensing of Nokia’s patents for the next 10 years.
Nokia’s CEO Stephen Elop will be rejoining Microsoft (Elop previously served as an executive at Microsoft). Nokia employees (32,000) will transfer to Microsoft, including 4,700 people in Finland.
Now let’s get down to business, why did Microsoft decided to buy Nokia considering that they have been working together for quite some time now:
Owning Nokia is far better than just partnering with Nokia as Microsoft will now have total control over the products both hardware and software (just like what Sony did when it acquired Ericsson Mobile). And I think the biggest reason for the acquisition is Microsoft wants to maintain and secure the Windows Phone ecosystem as seen in its statement that the company wants to bring “one brand” through a “united voice.”
I think Microsoft has no choice but to acquire Nokia. First because Nokia is the biggest supporter of Windows. Secondly, Google has Motorola and Android OS. Sony has Ericsson mobile. Apple has its iPhone and iOS. Facebook is looking for a phone company (Blackberry maybe?). What if Facebook acquired Nokia? What will happen to Microsoft’s chances to make it big in the mobile space?
According to Microsoft, now it has acquired Nokia, it plans to capture 15% of the smartphone market in five years – a tall order if you ask me. Currently, Windows has 3.3% market share surpassing Blackberry with only 2.7%, putting Windows in 3rd place in the smartphone market.
The biggest setback is while Microsoft has Nokia now, it will slowly lose its partners like Samsung, HTC, Huawei, ZTE and other mobile phone makers who are supporting or is planning to support the Windows mobile platform. Why would these companies support a mobile OS from a company who has it’s own mobile phone device – a competitor at that.
Remember what happen to Microsoft Surface? When Microsoft announced their own tablet, Microsoft partners were disappointed for the same reason. The same thing happen when Microsoft introduced their Zune media player in 2006. It alienated all the other hardware vendors who had introduced devices powered by Microsoft OS. Having Nokia will have the same result with the other smartphone OEMs.
Buying Nokia will not assure Microsoft or any other takers (if ever) a place in the mobile space. Both Microsoft and Nokia should work harder if they really want to compete with Android and iOS. Like choosing a good leader, creating a phone to work like a phone and not a PC – like dropping the Metro interface and/or removing the ‘Start’ button maybe. More integrated messaging like the Blackberry Hub. More attractive and more stylish phone designs.
It’s going to be an uphill climb for Microsoft and Nokia to compete with the likes of Google, Samsung and Apple. But we cannot expect Microsoft to just take this battle sitting down, they have to do something and buying Nokia is their first move.
But if I were Microsoft, I will not have bought Nokia, but instead I will make a bid to buy Blackberry. I think Microsoft and Blackberry has a better chance because of its enterprise mix. But of course, it’s just me and I am not Microsoft.
By: Jerry Liao