NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Monday, September 2nd, 2013

Microsoft buying Nokia’s handset division in $7.2 billion deal; Stephen Elop returning

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.

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