Microsoft's Inevitable Nokia Purchase Adds Little Lustre


Microsoft will acquire the mobile phone business and related patents of Nokia Corporation for a total cash consideration of EUR5.44bn (US$7.12bn). Microsoft seeks greater freedom to propagate its Windows Phone software for mobile devices and maximise its earnings potential from that intellectual property portfolio. As Nokia accounts for more than 70% of all Windows-powered mobile devices shipped every quarter, taking control of the company will allow Microsoft to remove 'friction' that has impeded Windows 8 adoption on mobiles and accelerate innovation. Although BMI expects Windows' market share will increase markedly as a result, we do not share Microsoft's optimism that the acquisition will deliver the kind of margins needed to survive in the hardware sector.

Microsoft will buy the Nokia Devices & Services business for EUR3.79bn; this includes design teams, manufacturing facilities, sales and marketing resources and support platforms. A further EUR1.65bn will be paid for related patents and intellectual property. Around 32,000 employees will transfer to Microsoft on completion of the deal which, pending shareholder and regulatory approval, will close in Q114. Nokia will be left with its core mobile infrastructure business ( NSN ) and its location information services unit, Here .

With handset shipments amounting to 61mn in Q213, Nokia remains the second-largest handset vendor in the world, well ahead of nearest rival Apple (7.2%) but now well behind market leader Samsung Electronics (25.4%) according to BMI 's Consumer Electronics industry research team. Nokia's market share has tumbled rapidly over the last three years, o wing to a lacklustre smartphone portfolio that has been eclipsed by Samsung's Android-powered Galaxy smartphones and Apple's high-end iPhone. Its share of the smartphone segment - an area it once dominated with its Symbian platform - now stands at just 3.3% of a Q213 market estimated at around 225mn.

Nokia Still Relevant But Mainly In Emerging Markets
Handset Market Share By Vendor, Q213

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This article is tagged to:
Sector: Consumer Electronics
Geography: Global