September 3, 2013
Microsoft is paying $7.17 billion in a deal to acquire Nokia’s devices-and-services business and license its mapping services. By purchasing Nokia’s core cellphone business, Microsoft is hoping to better compete with Apple, Google and Samsung in the fast-growing mobile business. The move follows the announcement of Steve Ballmer’s planned retirement as Microsoft CEO. Several Nokia executives will transition to Microsoft as part of the deal and could become contenders for Ballmer’s position.
“Stephen Elop, Nokia’s CEO, and several other executives are joining Microsoft as part of the deal,” reports The Wall Street Journal. “Mr. Elop, a former Microsoft executive, is among the names being circulated as Mr. Ballmer’s successor. Microsoft recently announced that Mr. Ballmer will retire from his post within a year, or when the next CEO is chosen.”
“Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing,” explained the companies in a joint press statement.
The companies are already closely aligned, as Nokia is one of the largest supporters of Microsoft’s phone software. According to comScore, Microsoft’s current U.S. market share in smartphones stands at about 3 percent.
“The deal with Nokia is an apparent acknowledgment that Microsoft needs a stronger hand to play in the mobile-phone business, where it is playing catch-up to Apple Inc. and Google Inc.,” WSJ suggests. “Microsoft’s lagging position in mobile is one of the most serious threats Mr. Ballmer’s successor will need to tackle. The deal also is a recognition by Nokia that it is better to sell off its smartphone business than take on rivals like Apple on its own.”
While Ballmer characterizes the deal as “a bold step into the future,” AllThingsD notes that “Nokia is hardly the mobile-phone juggernaut it once was, having fallen far behind Samsung and Apple in the smartphone race.”
AllThingsD has posted the full slideshow presentation that details the company’s rationale for the acquisition. Among the key points:
- To accelerate its share and profits in phones.
- To create a first-rate Microsoft phone experience for its users.
- To prevent Google and Apple from foreclosing app innovation, integration, distribution and economics.
- To avail itself of an outsized financial opportunity fueled by growth in smartphone business.