Some are calling it “The end of an era”, as the once prominent mobile phone manufacturer Nokia will cease to produce any more handsets. Fans of the Finnish mobile manufacturer have been mourning the loss, and coming to terms with the fact that there will no longer be another phone carrying the Nokia brand. Nokia threw its lot in with Microsoft and Windows Phone after they feared their products would be overshadowed on Android by more popular handset manufacturers. Now, after failing to dent the highly competitive smartphone market they have conceded to absorption by Microsoft.
The acquisition of Nokia by Microsoft has been rumoured for some time, but a deal seemed to be off the table as recent as 4 months ago. The Register reported that at the time, Nokia’s market capitalization sat around the $14 billion mark however a price couldn’t be agreed between the two companies. Microsoft announced yesterday that they had acquired Nokia’s smartphone division, and patent portfolio for a total of $7.2 billion. This is a steal when you consider that they shelled out $8.5 billion for Skype two years ago!
Back in 2011 Nokia partnered with Microsoft and eventually announced that all of their smartphones would run on the Windows Phone operating system. By committing to Microsoft, Nokia ended up operating at a loss of over €1 billion that year with quarterly losses following in 2012. With Nokia floundering in the smartphone market holding less than a 5% share the suggestion was that they would introduce phone running on the Android operating System after Microsoft’s exclusivity contract was up. As it’s turned out, Microsoft have absorbed their own hardware manufacturing division in an attempt to compete with Apple and Android. Despite their purchase, they insist they will accommodate other manufacturing partners that operate Windows Phone, such as HTC and Samsung. Choosing to acquire their own in-house hardware division is sure to ruffle a few feathers among their “partners” though.
Looking to the Future
The Verge takes a look at figures posted by Microsoft and concludes that the aim is to triple its market share percentage within a 5 year period, taking the share to 15%. By bringing Nokia on board Microsoft will be able to cut costs, and considering that Nokia accounted for over 80% of all Windows Phone shipments in the second quarter of 2013, savings will be considerable. They have estimated they will save $600 million annually, but only time will tell if they can make serious progress in a marketplace that seems to be sewn up.
Death or Glory?
Sceptics will say that the union is doomed. With both companies holding such a small percentage of respective operating system and hardware success, what makes Microsoft believe that they can turn their fortunes around? Now that Microsoft are employing a tighter control of how their operating system is implemented onto devices, we should find out whether it was Nokia that failed to keep up with its smartphone competitors, or if Windows Phone is just not what consumers are looking for.
Sources: Nokians Mourn The Loss Of Their Company - The Verge Microsoft Nokia Merger No Go - The Register Nokia Confirms Microsoft Partnership - TechCrunch Nokia Keeps Open Mind About Android - TechCrunch Microsoft Confirms It's Still Committed to Windows Phone Partners - The Verge Microsoft's Nokia Deal By Numbers - All Things D