Microsoft took a bold move on 3 September 2013 that could change its view completely. Microsoft wants to recreate itself as a company that offers ‘devices and services’ and it has a built an important step towards that direction. Board of directors of both companies decided to take part in a transaction that will see Microsoft purchasing all devices, patents, licenses, and service businesses owned by Nokia. Microsoft made this move in line with their partnership promise made in February 2011 as well the increasing popularity of Nokia’s Smartphones. This acquisition, unified branding, increased synergies, and faster innovation will allow Microsoft to grow its profits and share in small devices. On the other, this transaction will allow Nokia to gain better sales, a strengthened financial standing, and a solid foundation for forthcoming investments.
The transaction, under the agreement made between the two companies, will cost Microsoft a total of $7 billion. Microsoft hopes to draw cash from its foreign resources to fund this transaction, which forecasts purport will close in 2014’s first quarter. However, shareholders from Nokia’s side, regulations, and other conditions may affect the transaction closure dates. Although Microsoft will bring Nokia, its design, manufacturing rights, and distribution privileges into its fold, it will not submerge all aspects of Nokia. More specifically, this transaction involves Nokia’s Smartphones and devices unit. This unit includes the Lumia Smartphones, a brand that operates on Microsoft’s windows eight operating systems, as well as the Nokia’s Asha phones.
Microsoft will benefit from the acquisition significantly particularly in the Smartphones and devices market. The benefits that the company receives from Nokia present equal importance as the resources it offers. The action made by these two companies will help consumers, shareholders, and employees from both sides. Merging these two teams will improve Microsoft’s profits, share in mobile devices, and strengthen opportunities for both Nokia and Microsoft. Additionally, Microsoft will benefit from Nokia’s talent and proven capability in essential areas such as engineering and hardware design, manufacturing, and supply chain management.
Ballmer, Microsoft’s Chief Executive Officer, states that the Microsoft family will receive Nokia’s incredible party with joy and honor. The two companies have collaborated in many instances for a long time and leaders from both sides anticipate a high execution that will also involve a smooth transition. Microsoft’s forecast expects the acquisition to result in increased share earnings as from FY2015. As for Nokia, the acquisition will give it another chance for reinvention and strengthening of economic grounds. Top management from Nokia believes that the acquisition stands as a safe path that will help the business as well as its shareholders. Additionally, becoming part of an innovative company will benefit Nokia and its employees. Microsoft has vast financial resources, strategy, and a great determination to make it in the mobile industry.
Some of the significant questions about Microsoft’s Nokia acquisition:
- Should consumers expect new phones with Microsoft’s branding?
Microsoft will receive a ten-year license to make use of the Nokia brand on phones, which includes the Asha and Lumia brands. The company will seek to come up with a unified brand across windows and Lumia. However, Microsoft will maintain the same branding on the Asha phones.
- Will Microsoft develop products with high and reliable quality after the acquisition sufficient to rise in the Smartphone market?
Nokia and Microsoft have almost similar vision and mission statements that ensure quality in their products. These similarities have made Microsoft and Lumia form good collaborations in the past. Further, Microsoft values seamless integration and hardware experience greatly. Therefore, consumers should expect great results from Microsoft.
- Will Nokia’s acquisition lead to Microsoft’s breakup?
Microsoft’s acquisition of Nokia as a corporation comes as a defensive step. Nokia accounts for more than eighty percent of Microsoft’s phone operating system purchases. Additionally, the purchases stopped a possible merger between Nokia and Android. Microsoft cannot allow the best company using its windows platform to fail or add new platforms.
- Will Microsoft’s deal with Nokia produce a significant impact the Smartphone business?
The Nokia-Microsoft deal will probably mean a good thing for consumers. The acquisition will mean that the Smartphone market will have three viable choices instead of the current two, Android and Apple’s IPhone. Additionally, many people expected Nokia to run out cash sometime in 2015, and thus Microsoft will serve as its lifeline increasing its stake in the smartphone’s’ business.