An insightful explanation of the Microsoft-Nokia strategic rationale. Here's the first part of this article (click on the link below for the full text).
"GSMAintelligence.com, Sept 2013 -- Microsoft announced yesterday that it is acquiring Nokia Devices & Services for $7.2 billion, a bold move by the software giant aimed at strengthening the position of Windows Phone in a smartphone market that continues to be dominated by devices running Android and iOS. This deal is expected to close in Q1 2014 subject to shareholder and regulatory approval.
In this analysis, we look at the strategic rationale for the acquisition, focusing on the next wave of mobile growth driven by demand for data services in fast-growing markets, and assess how well Microsoft-Nokia is positioned to benefit from it.
What is the strategic rationale behind Microsoft-Nokia?
From a Microsoft point-of-view, there are two main reasons for the acquisition, which are intricately intertwined. The first is to consolidate its mobile position. For many years it has articulated the importance of being firmly in the mobile space, but has largely been unsuccessful throughout a number of platform iterations, leaving it increasingly irrelevant in the post-PC era (which, of course, it dominated during the 1990s and 2000s). Its share of global smartphone sales (through Windows Phone) languishes under 5%. Nokia has been its principal supporter since the formation of their strategic partnership in February 2011. Both firms have essentially bet their respective futures in consumer mobile on this, so we see the acquisition as a logical extension from partnership to full integration.
The company has positioned itself for the future as a 'devices and services' business. While this can be read a number of ways, we believe the most prescient is in a mobile context where it seeks to control an integrated ecosystem of hardware, software and content/services to challenge the ecosystems of Apple and Google. While it can claim to have control over two of these without Nokia, this deal provides it the missing piece in hardware. In addition, Nokia provides a ready-made, proven capability in supply chain management, marketing and distribution. The alternative (if it was even considered) of investing in all of these on its own would have been extremely difficult and costly, and a particularly unpalatable option for Microsoft given an increasingly impatient investor base looking for clear success in mobile."
https://gsmaintelligence.com/analysis/2013/09/why-emerging-markets-hold-the-key-to-smartphone-success-for-microsoft-nokia/400/
