Why Microsoft Had Purchase Nokia?

RISHAANA DHAVANATHAN EU/IS/2008/MS/57

DISCIPLINE OF MARKETING FACULTY OF COMMERCE AND MANAGEMENT EASTERN UNIVERSITY, SRI LANKA

About Microsoft Microsoft, founded in 1975 by Bill Gates and Paul Allen, is a veteran software company, best known for its Microsoft Windows operating system and the Microsoft Office suite of productivity software. Starting in 1980 Microsoft formed a partnership with IBM allowing Microsoft to sell its software package with the computers IBM manufactured. Microsoft is widely used by professionals worldwide and largely dominates the American corporate market. Additionally, the company has ventured into hardware with consumer products such as the Zune and Xbox. Microsoft has made a presence on the Web with the MSN internet portal and Bing Search Engine. About Nokia NOKIA is a Finnish multinational communications corporation. It is primarily engaged in the manufacturing of mobile devices and in converging Internet and communications industries. They make a wide range of mobile devices with services and software that enable people to experience music, navigation, video, television, imaging, games, business mobility and more. Nokia is the owner of Symbian operation system and partially owns MeeGo operating system. Microsoft Enters Into $7.2B Deal To Buy Nokias Devices and Services Business and License Its Patents In a surprise move, Microsoft announced Monday evening (2/9/2013) that it has inked a deal with Nokia to acquire substantially all of Nokias Devices & Services business, license Nokias patents, and license and use Nokias mapping services. Under the deal, Microsoft is buying the "Lumia" and "Asha" brand names that Nokia has used for its smart and intermediate phones. It has licensed the use of the Nokia brand on handsets for ten years, but the Finnish business will retain ownership of the brand. That will probably mean that the Nokia brand disappearing from handsets in the next decade, ending over 30 years' history in the business The total price of the deal is EUR 5.44 billion in cash, which is currently worth $7.17 billion in U.S. dollars. The Devices and Services business acquisition accounts for EUR 3.79 billion of that, with the patent licensing deal making up the remaining EUR 1.65 billion. Why Microsoft Had No Choice but to Purchase Nokia Nokia was due to reach the end of its Windows Phone licensing deal with Microsoft in 2014, after ditching its own Symbian and Meego operating systems in favour of a Windows Phoneonly strategy in 2011. While sales of smartphones have since crashed to just over three per cent of the company's sales, it dominates the Windows Phone market. A defection of Nokia to Android would have been a major blow to Microsoft.

Microsoft Corporation has taken a lot of flak for its recent acquisition of Nokia Corporations hardware business, but the criticism may not be entirely valid. Microsoft burned a lot of cash on the deal, and it will burn more keeping it running over the next year or two, but there are reasons for the acquisition. Nokia had too much control over the Windows Phone platform, and Microsoft could not afford to lose its primacy over its mobile efforts. Microsoft granted Nokia special privileges to adapt Windows Phone to its own preference, and Nokia over time became the most popular Windows Phone manufacturer. Then it became essentially the only Windows Phone hardware company. This is where its rights to change Windows Phone came to bear as a problem for Microsoft: If Nokia were the only Windows Phone OEM that mattered, and it could change the operating system, Microsoft had little control over its own platform. Sure, it built the developer tools, but if it could not control the user experience, in a real way its mobile operating system was outside of its own control. But, one way or the other, losing Nokia's design, manufacturing and distribution ecosystem would have been a dagger to the heart of Microsoft's plans to gain a firm footing in the mobile phone space, given that Nokia sells over 80 percent of all Windows Phone handsets. While it is strong in the "feature phone" business in the developing world, it has struggled in the all-important smartphone business. Apple's iPhone and handsets running Google's Android together make up over 95% of sales in the US and China, the world's two largest smartphone markets. Windows Phone only has shares above 10% in Mexico and France, according to the company's figures.

Nokia Confirms Microsoft Partnership, New Leadership Team, organizational Changes Nokia outlines new strategy, introduces new leadership, operational structure. Major elements of the new strategy include: - Plans for a broad strategic partnership with Microsoft to build a new global mobile ecosystem; Windows Phone would serve as Nokias primary smartphone platform. - A renewed approach to capture volume and value growth to connect the next billion to the Internet in developing growth markets - Focused investments in next-generation disruptive technologies - A new leadership team and organizational structure with a clear focus on speed, results and accountability