Microsoft boosts mobile play with Nokia acquisition

Microsoft, one of the largest tech firms on the planet, has had a tough time breaking into the upper echelon of mobile. First, the House That Gates Built was slow to the plate, missing out on mobile as its competitors surged ahead; even after retooling its strategy, the company’s Windows Phone platform still trails Apple’s iOS and Google’s Android by a massive margin. Its Windows 8 interface, which attempted to unify desktop and mobile platforms, wasn’t well received by the public either, and its Surface tablet flopped, costing Microsoft nearly a billion dollars. Whether or not the Surface 2 performs better in the marketplace remains to be seen—it’s slick, but could suffer the same fate as its predecessor due to the Windows RT operating system. 

In an attempt to turn the tide and catch up with its competitors, Microsoft is once again reaching into its giant piggy bank to buy itself out of a rut. The company announced in September that it will acquire the devices-and-services division of Nokia for $7.2 billion.

For Nokia the deal makes a lot of sense. Once a leading manufacturer of mobile handsets, it’s long been eclipsed by Apple and Samsung and now commands just a sliver of the market it formerly dominated. These days Nokia makes its money selling low-end feature phones and slow-moving Windows smartphones.

“After a thorough assessment of how to maximize shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders,” said Risto Siilasmaa, the company’s interim CEO, in a press release.

Under the terms of the deal Microsoft will license Nokia’s patents as well as license and use its mapping services. Nokia Solutions and Networks (NSN), formerly known as Nokia Siemens Networks, will become its namesake company’s biggest line of business following the transaction.

Tony Cripps, principal analyst of devices and platforms at Ovum, commented on the news of the deal on the firm’s website in early September: “While Microsoft and Nokia have jointly been increasing the money flow through the Windows Phone marketing faucet of late, it will take mega bucks to take on Apple and Android head cheerleader Samsung for marketing volume and volume shipments.” 

He continued, “There is also a sense that while Microsoft has many of the key elements for consumer-tech market success in place, too many of those elements feel not quite at parity with their rivals. That said, Microsoft has some areas of definite advantage over its rivals across this vast battleground, especially in gaming (via Xbox), in consumer-business crossover services such as VoIP (Skype), and in the ease of integration of Windows Phone with its own Office 365. Moreover, we shouldn’t forget its huge global installed base of PCs, which are as much a part of the complete picture as smartphones, tablets and online services.”

Cripps concluded, “Ovum needs to see sustained progress in Windows Phone shipments over the next three or four years—15% market share is a good target to aim for—to be convinced that Microsoft can establish itself as a real consumer-tech market maker rather than a follower.”

Perhaps Microsoft’s biggest news is that its next-generation gaming and media console, the Xbox One, landed on store shelves November 22, with the company reporting sales of one million units in the first 24 hours. As the big horse in its corporate stable, Microsoft wants to get as many Xbox Ones into as many households as possible, partly for practical reasons: CNET reports that the console sells for just $28 more than it costs to manufacture. 

Nokia buys Siemens portion of NSN

Nokia bought out Siemens’s stake in their Nokia Siemens Networks joint venture for about $2.2 billion on July 1. What’s in a name? Everything. NSN, as previously stated, is now known as Nokia Solutions and Networks; the rebranding includes color and font changes but, thankfully, leaves email addresses and, more importantly, brand awareness unchanged. 

There’s been no word yet on what the company’s restructuring will entail, but most analysts agree that the buyout is good for the overall business. The deal “is a very positive step forward for the mobile infrastructure company,” wrote Daryl Schoolar, principal analyst for network infrastructure at Ovum. “Mobile operators want stability in their network vendors, so ownership uncertainty certainly didn’t help NSN in the pursuit of new wins.”