Microsoft acquires Nokia's mobile arm
September 3, 2013 // 8 a.m.
Microsoft has acquired the devices division of Nokia in an all-cash deal valued at €5.44 billion, a move that will see Microsoft once again entering into direct competition with its own customers.
Nokia, once a world leader in the mobile phone market, has had a tough few years. Symbian, its home-brew pride-and-joy mobile operating system, has long been outclassed by bash young upstarts like Apple's iOS and Google's Android, and attempts by the company to join in on the smartphone explosion - such as with the N900, which ran a Linux derivative dubbed Maemo - didn't go well.
The answer, suggested by current chief executive and former Microsoft employee Stephen Elop, was to ditch its own-brand software and license in someone else's - and to no surprise, Elop chose Windows Phone from his former paymaster. Entering into a tight relationship with Microsoft - a relationship which has seen several former Microsoft staffers take on executive roles at the company - Nokia launched the Lumia family of Windows Phone devices, the first Nokia phones ever to come with a non-Nokia operating system.
That turns out to have been the smartest move the company could have made: its market share, which had been sinking fast, has begun to rise as buyers pick up the aggressively-priced and feature-rich Lumia devices. It also, however, gave Microsoft considerable control over the future of the company - control it is now exercising by acquiring Nokia's entire mobile division in a €5.44 billion cash deal.
'It's a bold step into the future - a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft's share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services,' claimed Steve Ballmer, Microsoft's outgoing chief executive, of the deal. 'In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution.'
Elop, naturally, was equally effusive about returning to the Microsoft fold - in which he will run the company's devices and services division, having announced plans to step down as Nokia's chief executive. 'Building on our successful partnership, we can now bring together the best of Microsoft's software engineering with the best of Nokia's product engineering, award-winning design, and global sales, marketing and manufacturing.'
The deal will see Microsoft taking full control over Nokia's Smart Devices and Mobile Phones business units, which produce the Lumia family of smartphones and low-cost featurephones respectively. Nokia, meanwhile, retains its telecommunications hardware business Nokia Siemens Networks, Here location-based services arm, and its patent portfolio under the Advanced Technologies division. These patents are to be licensed to Microsoft for at least a ten-year period, the agreement states.
For Microsoft, the acquisition does what the company had previously stated it had no intention of doing: herald the launch of Microsoft-brand smartphones, which will enter the market in direct competition with its Windows Phone licensees. It's a move that was telegraphed by the launch of the Surface family, which put the company in competition with its customers in the Windows 8 and Windows RT tablet markets - and saw many ditch the latter as a direct result.
For Nokia, it's the end of an era - but that's something the company should be used to: founded 150 years ago as a paper mill then turning into a rubber manufacturer and electricity provider before hitting on the idea of making mobile phones, Nokia has a history of reinventing itself to stay on top of technological trends - it's just going to do so now in a far less customer-facing manner.