Finally Nokia goes under. Last month, Microsoft announced that it will be buying Nokia’s Devices and Services division, as well as access to its extensive patent portfolio for a grand total of $7.17 Billion. While many were shocked by this development, a lot of people had foreseen this move years ago. Like most change of fortune stories in the mobile industry today, it all started with the iPhone. When Apple launched its ground breaking device in 2007, Nokia was the king of the mobiles, claiming over 49% of the market share with its Symbian operating system. However due to overconfidence and a lack of willingness to be innovative with their smartphone software, Nokia began to lose its lead as numero uno. To make matters worse, competition from Asia in the form of Samsung and LG began eating away at their market share in the developing countries by offering affordable smartphone loaded with the Android, the newest software from Google. By 2011, Nokia’s market share had dropped by more than half to about 23% so they decide to change their strategy and hire a new CEO in the person of Stephen Elop, who was a former Microsoft employee. His first major decisions as CEO were to drop Nokia’s in-house software, Symbian and form a partnership with Microsoft, another company struggling to re-invent itself in the mobile space. In exchange for access to Nokia’s phone hardware and mapping services among other things, Microsoft will offer Nokia an enviable position as primary hardware partner for its Windows Phone operating system. Nokia fanboys around the world cried foul. Some blamed Microsoft for condemning their beloved Symbian OS to extinction, other wailed on Nokia for betraying them and siding with the evil Microsoft. Lots of tech pundits predicted that this partnership was the step in a series of moves that will eventually lead to the outright purchase of Nokia by Microsoft. Today, those predictions have all but come true and by first quarter of 2014, Nokia will no longer be in the business of making phones of any kind. What’s surprising is how cheap (relatively) it was for Microsoft to make this deal. In 2011, Google bought Motorola Mobility (an arguably smaller company than Nokia) for $12.5 billion. Even Microsoft’s last major purchase (of Skype) cost them $8.5 billion. This just goes to show how far Nokia had fallen from its pedestal. Some believe it was all part of Microsoft’s evil plan to get it by all means necessary. The fact that Nokia’s CEO, Stephen Elop is now back with Microsoft (part of the terms of the deal) and now also in the running for the top job at Microsoft once the current CEO retires in less than a year, seems to support this theory. Whatever the reason behind this deal, I personally believe it was a good move by both companies. Nokia was responsible for over 80% of Windows Phone sales but in the past year, only about 20 million Windows Phones were sold compared to over 140 million iPhones and over 400 million android devices. Even its Asha phones, while wildly popular in developing countries, wasn’t doing well enough to raise Nokia into profitability. They would have run out of money in a few years and that would have been the end. Microsoft on the other hand had way more cash to spend and it was only logical that they took over the good job that Nokia had started and make sure that it didn’t fall by the wayside. Hence, Microsoft will now be responsible for producing both the high-end Lumia phones as well as the more affordable Asha phones. This move puts Microsoft in a position similar to Google i.e. they are responsible for both the phones physical hardware as well as the software. What remains to be seen is how Microsoft will treat its new hardware business: whether as an autonomous entity just like Google is doing with Motorola, or as a more integrated part of the whole Windows Phone division. Whatever choice they make will definitely affect Microsoft’s relationship with its other Windows phone licensees (HTC, Samsung, Huawei). So, what does all this mean for us regular folk? Will Microsoft start paying more attention to us in developing nations, riding on Nokia’s popularity in these regions and offering us more affordable phones and better access to their services? Will we stop buying the Asha and Lumia phones once they discover Nokia is no longer the one making them? Only time will tell.
Posted on: Sat, 05 Oct 2013 06:08:23 +0000