What has been speculated for a long time has finally happened: Microsoft acquires Nokias mobile business. The two companies announced on Tuesday the 03.09.2013 that the software company Microsoft takes over the core business of the mobile phone company Nokia. The price of the deal amounts 5.44 billion Euro, whereby the software giant spends 3.79 billion Euro for the business with devices and services and further 1.65 billion Euro for patent licenses.
Both companies are in crises since a few years. Microsoft and Nokia since early 2011 are already working together on smartphones. The Finnish company Nokia has been for a long time the market leader in the mobile phone industry, but it has lost the leading market position by the rise of the Smartphones, e.g. the iPhone from Apple. On the other hand, the software giant from California struggles with the change in his own business since a long time, because nowadays customers prefer a tablet and a Smartphone than a computer. With this acquisition, Microsoft is trying to develop and to produce Smartphones with the help of Windows Phone and Nokia. The goal of this collaboration is to increase the market share of the companies.
Microsoft has set the following objectives:
- Worldwide Smartphone Shipments (2018): $ 1.7 billion
- Assumed Market Share (2018): 15%
- Annual Revenue (2018): ~$45 billion
- Gain: $ 4.5 billion at 10 percent margin, $ 2.3 billion at 5 percent margin
Whether these objectives will be achieved remains to be seen. There is also the important question of who will lead the Microsoft concern. The hottest candidate is the Nokia CEO Stephen Elop. He was Microsoft Manager and now he is believed to replace Ballmer. The Smartphone market is highly competitive, price pressures are high, margin low, and only Apple and Samsung generate significant profits. But is this purchase not already too late? Apple and Samsung have a high market share and furthermore they have a big advantage through technology. For the analyst, the cooperation between Nokia and Microsoft came too late. Competitors such as Apple, Google, Sony and Samsung have a new marketplace in sight namely Wearable Computing, either as SmartWatch or glasses. How Microsoft is responding to Wearable Computing remains to be seen. If the software giant also misses this trend, he would again have to endure scorn and derision by the media. Perhaps this time, Microsoft has learned from its past.
Source: Microsoft Press Release