The Nokia acquisition is a logical step forward for Microsoft but will not change the company’s position in mobile overnight, according to Ronan de Renesse, principal analyst, Analysys Mason.
Renesse commented that the acquisition will have a limited impact on the smartphone market in short/medium term.
Mason also stated that Nokia and Microsoft have been working hand-in-hand for 2.5 years on the Lumia device range and we don’t expect the acquisition to fundamentally change the Lumia team and its product roadmap for the next 12 months.
He said that the biggest opportunity for Microsoft is in the non-smartphone space. Microsoft will gain a foothold in developing market via Nokia’s non-Lumia device portfolio; 45.5% of Nokia mobile device shipments went to Greater China, Middle East & Africa and Latin America in 2012.
This strengthens Microsoft’s position versus Google in connecting the next billion people.
According to Mason, Microsoft must make a decision on the business model to adopt in mobile.
The handset market is extremely competitive making it particularly hard to sustain high margins and make a profit. Microsoft has the ability to undercut its competitors and use mobile as a loss leader to gain global reach for its services and software ecosystem.
No handset manufacturer except Nokia has been fully committed to Windows Phone platform in the past 12 months. Maybe it’s time for Microsoft to abandon its Windows licensing model in mobile.
Nokia had Tuesday announced that it is selling the majority of its handset business to Microsoft in a $7.2 billion all-cash deal, while Stephen Elop has stepped down as Nokia’s CEO.
Microsoft is paying just EUR3.8 billion for the handset division, and a single payment of EUR1.65 billion to license Nokia’s patents for the next ten years. Microsoft also gets a license for Nokia’s mapping services.
The operations that are planned to be transferred to Microsoft generated an estimated EUR 14.9 billion, or almost 50%, of Nokia’s net sales for the full year 2012.
Stephen Elop, Nokia’s CEO is stepping aside as Nokia President and CEO but will stay in charge of the mobile phones as Nokia Executive Vice President of Devices & Services.
Following the purchase, Microsoft said that it aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.
For its part, Nokia plans to focus on its three established businesses — NSN, mapping and its patent portfolio.
“After a thorough assessment of how to maximize shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders,” said Risto Siilasmaa, Chairman of the Nokia Board of Directors and, following today’s announcement, also Nokia interim CEO.
At closing, approximately 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide
Nokia will retain its headquarters in Finland.
As part of the transaction, Nokia is assigning to Microsoft its long-term patent licensing agreement with Qualcomm, as well as other licensing agreements.
Nokia will continue to own and manage the Nokia brand, but will grant a 10-year license to use it to Microsoft.
“Following this transaction, Nokia’s financial situation is expected to be significantly stronger and its earnings profile significantly improved,” said Nokia CFO and interim President Timo Ihamuotila. “We will have three well-positioned businesses, each a leader in its market. Overall, we will continue to focus on managing and maximizing the assets of Nokia Group prudently and pragmatically to create value for Nokia shareholders.”