Over the long Labor Day weekend Microsoft acquired Nokia, a smart move sure to prove valuable for the Redmond, WA-based software producer. The buyout puts all of Nokia’s mobile business, patent portfolio, and 32,000 employees under Microsoft’s sphere influence for a cool 5.4 billion Euros (about $7.2 billion). Microsoft will pay 3.79 billion Euros for its mobile sector and an additional 1.65 billion for its various patented technologies when the deal closes by Q1 2014.
In addition to the terms of agreement, Microsoft will retain a data center in Finland where Nokia was formerly headquartered in order to better server new Microsoft customers in Europe. Microsoft will also be adding a fresh set of minds to its executive lineup, taking the likes of former Nokia CEO Stephen Elop, former Executive Vice President in charge of Smart Devices Jo Harlow, former Executive Vice President of Operations Juha Putkiranta, former Executive Vice President of Mobile Phones Timo Toikkanen, and former Executive Vice President, Sales and Marketing Chris Weber along for the ride.
The new purchase opens up some interesting possibilities for Microsoft, now in the early stages of transition having recently announced the imminent departure of current CEO Steve Ballmer upon choosing a successor. Now Microsoft has a pool of blooming execs at its fingertips to choose from as well as a new roster of hardware devices to run its software on, showing exactly why Microsoft opted to pull the trigger on Nokia.
Stephen Elop
With the deal all but finished, tech pundits are already pegging former Nokia CEO Stephen Elop to be Ballmer’s successor at the helm of Microsoft. Under Elops tutelage, Nokia spearheaded a smartphone campaign to develop the best imaging technology in the handset market. Perhaps even more valuable, though, is Elop’s inner knowledge of the happenings at Microsoft, having served a stint of just over two years as the head of the Business Division. As a senior member of the leadership team, he was responsible for the Microsoft Office line of products, releasing the flagship office suite shortly thereafter.
It’s important to keep in mind that while Nokia may have developed some formidable devices under the tenure of Elop, he still saw it fall from one of the largest smartphone vendors in the world to a ranking in the double digits, curtailed some due to a strategic partnership in 2011 with, you guessed it, Microsoft. The partnership allowed Elop to focus his resources and talent pool into developing hardware only, leaving the software to be filled by Microsoft. Nokia’s past four quarters have yielded underlying operating profitability as a result.
Hardware vs. Software
The 2011 agreement further allowed both Nokia and Microsoft to produce what they do best respectively, hardware and software. Really the whole reason Nokia joined forces with its partner in crime was due to the fact that the likes of Apple and Google were developing modern mobile operating systems like iOS and Android. Opting not to join the Android arsenal for fear of getting lost in the shuffle, Elop essentially handed over Nokia’s software duties to Microsoft.
After dominating the world of personal computing in the 90s, Microsoft shifted a heavy focus on the development of its software instead of its hardware. Though still producing the likes of its Surface tablet, sales haven’t been great leading to speculation that Surface sales were the exact reason behind Ballmer’s departure while placing an emphasis on software development. Windows Phone is really the only alternative to iOS and Android, a valuable position for Microsoft as it has only two chief rivals to compete with and an alternative for those who aren’t tickled by either’s fancy. With Nokia shelling out respectable devices, Microsoft can continue to set its sights on software without having to worry about the gadgets running it.
Bottom Line
Though not catching us all completely by surprise, the alliance between Nokia and Microsoft creates another facet to the constantly evolving smartphone market that some may not have been prepared for. Microsoft is now essentially Google, in that it owns its own sustaining line of smartphones and can put forth most of its own efforts into developing software for it. Nokia, like Google’s Motorola, doesn’t have the same kind of brand or staying power as Apple or Samsung devices but with a powerful company behind it things could change quickly. Having once demoed a Nokia phone running Windows software, I can personally attest to the easily-navigable and seamless UI, as well as the photo technology and sizable device offered by both the OS and shell. If Microsoft can achieve Apple and Samsung status with Nokia directly under its oversight remains to be seen.
Stay tuned to BostInno for the latest details surrounding the deal as we’ll be sure to keep you updated with any consequential tech news. In the meantime, let us know what you think of the new deal and how it will fare for both companies.
