Microsoft today announced that they are to buy Nokia’s phone manufacturing department early in 2014, pending a Nokia stakeholders vote. The deal won’t come as a surprise to anyone who has been paying any attention to the smartphone market as it has been on the cards for a while now.
It is still a big move, and not just because of the $7 billion dollars involved. Nokia have been hemerging money for some time now and this is the perfect opportunity for them to offload a large part of their business and focus on other areas. It is a shame to see the company that dominated the phone market for so long miss the mark so badly that they slipped to this.
Microsoft, for their part, were also late to the party. Their partnership with Nokia over the last couple of years was really a case of two huge companies who missed the boat playing catch-up by joining forces. Whether it is working or not is debatable. Windows phone sales certainly haven’t been as good as they might have been but there does appear to be steady progress.
With the continued decline of Blackberry, Windows Phone has become the solid number 3 in the smartphone market. With iPhone seeming to falter in recent times Windows will be targeting that number 2 spot but they are a long long way from that point yet. The vital US market has not been kind to Windows where they make up somewhere between 3% and 4% of smartphone sales, but there are some promising signs in other emerging markets.
What this move does mean is that Microsoft have committed to following through with their mobile strategy (although it was very unlikely they were to give it up considering the size of the mobile market). They are now following on from Apple, with their complete manufacturing control, and Google with their acquisition of Motorola. Whether it is too late for them to recover from their failure to enter the market on time remains to be seen.
For their part the shareholders on both sides have shown what they think. Nokia shares rocketed up by an astonishing 48% after the news was released showing a new belief in a company that has managed to cut loose it’s dead weight in one swoop. Microsoft shareholders are not so impressed with a 5% drop in share price. With the $7 billion dollar price tag and the extra 32,000 staff that Microsoft now have to take on there is a large increase in running costs.
It will be interesting to see if this gamble pays off