The IT Nerd

The shockwaves are still reverberating due to Microsoft’s purchase of Nokia’s phone business for $7.2 billion today. Every time something like this happens, people (including yours truly) read the tea leaves to see what this means. So to get some different views on this purchase, I leveraged two respected companies who’s job is to examine and offer opinions on this sort of thing. First, here’s the thoughts of Tony Cripps who is the principal device analyst at Ovum:

“While enabling Microsoft to face industry rivals such as Apple, Google and Samsung on more equal terms, it also represents an indicator for the future of consumer tech industry more generally and a symbolic end to the mobile phone industry we’ve known until today. 

The sale of Nokia’s mobile phone business demonstrates conclusively the need for major consumer technology vendors to create ever deeper and wider offerings to consumers and ecosystem participants in terms of their device, platform and service offerings. This approach is no longer simply an option but a pre-requisite to competing successfully in this highly converged market.

“Nevertheless there is still much to resolve if the acquisition is really to have meaningful impact. 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. We need to see that kind of commitment coming before we can really count Microsoft in the same league as its two main competitors.

“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.

“What is almost for certain is that beyond Apple and Google, Microsoft is the best equipped of today’s consumer tech giants to be able to put all the requisite pieces in place to succeed long term. Execution is another matter though and 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.

“The heat may be off for Nokia’s shareholders but for Microsoft’s investors the fire is only just being stoked.”

 For a different perspective, here’s what Juniper thinks of this deal:

The Implications for Microsoft

• The acquisition by Microsoft reinforces the company’s ‘devices and services’ strategy by purchasing all of Nokia’s Devices & Services business and licensing Nokia’s patents and mapping services. While this acquisition provides Microsoft with a much needed uplift and presence in the mobile sector, integrating these new assets, brand building and increasing market share will be the real challenge.
• Microsoft will get a larger footprint in the emerging markets with Asha as Nokia has committed substantial investment to the Asha range. This means the customer would perceive a switch from Asha to Lumia to be a whole scale upgrade in their entire ecosystem rather than just a smartphone.
• The technical advances in the smartphone ecosystem mean that the mobile device is increasingly a part of the broader CE industry than it has ever been. An acquisition in this area by Microsoft has been viewed by Juniper Research as a key strategy to expand and strengthen their strong mobile and fixed device ecosystem. The company is also expected to move into wearable devices soon.

 The Implications for Nokia

• Nokia has been struggling to position itself going forward against the likes of Samsung and Apple within the smartphone market. This is by no means a cold acquisition as there is an existing synergy between the two companies.
• This acquisition means that Nokia will now continue to focus only on three areas: network infrastructure and services; HERE (mapping and location services); and Advanced Technologies. Nokia is expected to focus on mapping and geo-spatial services as an “an effective alternative to Google”.

Clearly there’s a lot to this purchase and it will take some time to see how everything pans out. But I think the eventual outcome will fall in line with the thoughts of Juniper and Ovum.

When you think of the words “Windows Phone”, chances are you’re thinking of a Nokia product as they sell most of the Windows Phones on the planet. Microsoft clearly sees that as an opportunity to push the Windows Phone OS, so they bought the phone business off of Nokia for $7.2 billion:

The move reshapes Microsoft, adding consumer hardware – the Nokia handset business – to its PC software base. Nokia phones already use Microsoft’s mobile phone operating system. But it’s an open question whether Microsoft, which has never had great success in the mobile space, will emerge as a viable competitor to phone powered by Apple’s iOS and the Android systems used by Samsung and others.

“Today marks a moment of reinvention,” Microsoft CEO Steve Ballmer and Mr. Elop said jointly. “With the commitment and resources of Microsoft to take Nokia’s devices forward, we can now realize the full potential of the Windows ecosystem, providing the most compelling experiences for people at home, at work and everywhere in between.”

This sale highlights a number of things:

• Microsoft is serious about becoming a player in the mobile phone space by trying to do what Apple has done by controlling everything from the hardware, to the software and their related services.
• Anyone else who puts out a Windows Phone (HTC comes to mind as an example of this), is likely thinking of an exit strategy as they likely won’t be able to compete against Microsoft now that this purchase has happened.
• This deal had persistent rumours floating around for some time. One wonders if the fact that it happened shortly after Microsoft CEO Steve Ballmer announced his retirement is connected in some way.
• BlackBerry fans who were hoping that the persistent rumours of Microsoft buying BlackBerry can pretty much forget about that happening.

Nokia now becomes a telecom gear company which is far more profitable. As for Microsoft, let’s see how well this works out for them.

UPDATE: News.com has an e-mail to Microsoft employees from Steve Ballmer about the Nokia purchase.

UPDATE #2: The Verge is reporting that Microsoft wants to continue to license the Windows Phone OS to partners. We’ll see if that actually pans out.