Microsoft’s Acquisition of Nokia

Microsoft’s Acquisition of Nokia

Nokia on Tuesday announced that it was selling its mobile division for $7.17 billion (5.44 billion euros) to Microsoft. News about Microsoft’s acquisition of Nokia’s beleaguered mobile phone unit has created ripples in the market and has set the rumor gong ringing. What plans does Microsoft have up its sleeves now? What is up next in the acquisition spree?

Is Microsoft trying to match up to Google’s move which acquired Motorola? The frenzy around these questions has touched new heights and speculations are rife.

Microsoft’s move is in keeping with the current restructuring it has undertaken to stem the fall in its product sales. Given that Microsoft’s products are behind Apple and Android-based handset devices, the move can be interpreted as a desperate attempt to arrest its falling shares and close the growing gap with the two leading market players. With this deal, Microsoft also hopes to turn around Nokia’s declining handset business. Interestingly, this is the second handset business Microsoft has bought after it acquired Danger, in February 2008.

Advantage Microsoft?

Can we now say it is advantage Microsoft? It certainly is so. Microsoft will now be using the platform of a mobile company which arguably is the most well-known mobile brand around the world. Besides, Microsoft will stand to gain from Nokia’s well set-up supply chains in the world.

Roadblocks

The immediate challenge before Microsoft is to integrate Nokia’s operations without disrupting its own business. Given the magnitude of the acquisition it is yet to be seen how Microsoft can ensure that staff are not weighed down by overwork; retaining Nokia’s staff and pushing into a new business front altogether. A major challenge for Microsoft now is to assuage the fears of few companies outside Nokia selling phones with its software.

What it means to competitors?

With easy access to abundant cash, Nokia will renew its attempts to revive its sinking fortunes. Given the volatile nature of the Smartphone market coupled with the high costs of Apple products, Nokia will make an all out effort to turn around its fortunes. Its ability to manufacture cheap phones will stand it in good stead. However, it has to seriously address consumer concern of lack of apps and security elements on Windows Phone.

As Apple enjoys a distinct advantage on both these fronts, Microsoft’s aim is to catch up catch up with its rival. But the key question is will Windows Phone pose any challenge to Android. It all depends on the acceptance of Windows Phone. A cheap Android or cheap iPhones may turn the scales against the merger, unless the team up comes with something revolutionary.