Well, how’s this for late-breaking Labor Day news: Microsoft has just announced that it’s struck a deal with Nokia to buy “substantially all” of the Finnish phone maker’s Devices & Services business, plus license Nokia’s patent portfolio for ten years, for $7.1 billion in cash. As part of the deal, former Microsoft executive Stephen Elop will rejoin the company as an executive vice president.
Meanwhile, Nokia Chairman Risto Siilasmaa will become Interim CEO of Nokia.
The transaction, if approved, would make Microsoft a major player in the handset industry. For many years, Nokia was the world’s top maker of mobile phones, but it began losing market share as iOS and Android began taking off. Though its fortunes have declined, Nokia still makes and sells a lot of handsets.
In fact, its business as twice as big as Apple’s. It’s just not as profitable.
In late 2011, Nokia hired Stephen Elop to turn things around, and Elop, as many tech pundits predicted, forged an alliance with Microsoft to produce handsets running Windows Phone 7, and later, Windows Phone 8. The company’s Lumia line of smartphones are the best known Windows Phone devices.
Nokia was never Microsoft’s exclusive partner on Windows Phone, but it ended up being an almost-exclusive partner anyway. According to recent estimates, Nokia sells over eighty percent of Windows Phone handsets.
Microsoft executives apparently saw the writing on the wall, and concluded that the time had come to start doing what Apple and BlackBerry already do: Sell both the hardware and the software as one product.
Google, incidentally, is also in the handset business following its acquisition of Motorola Mobility. However, Android is (mostly) open source, and other companies make smartphones running Android – most notably Samsung, but also LG and HTC. HTC used to sell mostly handsets running Windows Mobile once upon a time, but now predominantly makes Android phones.
HTC is currently the second largest manufacturer of Windows Phone handsets, but whether it will remain committed to the Windows Phone platform after today’s big news remains to be seen, since Microsoft has just gone from partner to competitor.
Nokia will be a very different company after it hands over its best-known division (which employs some 32,000 people) to Microsoft. In a joint letter with Steve Ballmer, Stephen Elop called the deal the right move for both companies.
Today’s agreement will accelerate the momentum of Nokia’s devices and services, bringing the world’s most innovative smartphones to more people, while continuing to connect the next billion people with Nokia’s mobile phone portfolio.
With the commitment and resources of Microsoft to take Nokia’s devices and services 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.
We will continue to build the mobile phones you’ve come to love, while investing in the future – new phones and services that combine the best of Microsoft and the best of Nokia.
Nokia and Microsoft are committed to the next chapter.
Together, we will redefine the boundaries of mobility.
This is certainly a major move for Microsoft, and has sparked quite a bit of conversation online. After the transaction closes, they will own the Windows Phone experience, much like their competitors do with their platforms. Lumia will be a Microsoft brand, like Xbox and Skype.
Whether the move will help Windows Phone’s market share remains to be seen. BlackBerry and Apple are the only companies that sell handsets running BlackBerry 10 and iOS, respectively, but they’ve each lost market share and mind share to Google’s Android platform (though BlackBerry has lost much more).
Contrary to what tech pundits like Matt Miller are suggesting, Microsoft’s acquisition of Nokia’s devices business does not constitute the final nail in the coffin for BlackBerry. It does rule out Microsoft as a suitor in a prospective sale of the company, but Microsoft was never a likely acquirer of the Canadian mobile pioneer.
While BlackBerry has not been able to rebound in the North American market, it is far stronger overseas (particularly in Africa and Oceania) and it seems more likely to me that the company’s board will propose taking it private, as opposed to finding a buyer or breaking the company into pieces. BlackBerry 10 is by far the best mobile platform out there at the moment, and although it is rather young, it has a lot of potential. The forthcoming 10.2 release is expected to add a number of small but useful features missing from BB10 at launch, and add further polish and stability to what is already an incredibly secure and well-designed operating system.
What BlackBerry could really use is some kind of shot in the arm. Microsoft has just used its cash hoard to give its Windows Phone platform a boost and become a more global company. Time will tell if the acquisition was the right move to propel Windows Phone forward. For now, we can certainly call it a big move.