Mighty Fall of the 'Brick' ? - Nokia-Microsoft Deal
Finnish mobile phone maker Nokia, once the world's biggest seller of mobile phones, has announced that it will sell substantially all of its mobile unit and services segment to tech giant Microsoft for a whopping $7.17 billion dollars.
Microsoft is buying the majority of Nokia's cell phone unit for $5 billion, and spending another $2.18 billion to license Nokia's patent portfolio, for a total of $7.17 billion.
As a part of the deal, Nokia will grant Microsoft a 10-year non-exclusive license to its patents and will itself focus on network infrastructure and service.
"In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution." said Steve Ballmer, Microsoft chief executive officer.
The mobile revolution, which has produced front-runners, like Apple and Samsung have pushed Nokia from the top spot and the fall of Nokia has been fairly rapid coinciding with the extensive growth of smartphones.
Nokia failed to adapt quickly enough to market changes, starting to become the Dell of handsets.
Nokia took the top spot in 1998 from Motorola, but lost its ground in the first quarter of 2012 when Samsung shipped 93 million phones compared to about 83 million by Nokia, according to research firm Strategy Analytics.
Samsung overtook Nokia to become the world's largest maker of mobile phones. According to GfK-Nielsen's data, In India, Samsung's volume market share in urban areas in March rose to 31.4%, exceeding Nokia's 30.1%.
Back in 2011, Nokia partnered with Microsoft in an effort to beat off competition and recoup some of the lost ground to iPhone and Android-based devices. The company tried to make a combative push in smartphones to stay a leader and fought back to win market share from iPhone and Samsung with its Lumia smartphones.
The Finnish maker's bold strategy to switch to Microsoft's Windows Phone operating system for its smartphones clearly did not go too well.
Nokia Lumia 900, the company's flagship smartphone for the American market was also hit by software glitches and bugs. Although the glitch was a trivial setback to the company but it was seen as vital as it was Nokia's turnaround plan. The company had dumped its own smartphone operating systems to work wholly with Microsoft on Windows Phone devices.
Nokia was visibly frustrated with the app situation for Windows Phone devices. Nokia vice president Bryan Biniak said in July, "As a company we don't want to rely on somebody else and sit and wait for them to get it right."
The company has been coming out with new devices steadily since Windows Phone 8 came out in the market in November 2012, but the lack of apps and software updates has always been the weak point.
The Windows Phone Store currently has 165,000 apps, compared to the 900,000 or more in the Apple App Store, and the million apps in the Google Play shop.
Nokia was on a downward spiral with falling handset sales, widening loss quarter after quarter and non-lucrative Windows store, leaving it with the best option to sell itself.
With the acquisition of Nokia, Microsoft has made it clear that it is holding onto Windows OS and moving into direct competition with its partners.
Microsoft's vice president of operating systems, Terry Myerson said "Our OS group mission is to enable the innovations of our hardware partners to shine through on the Windows platform."
Microsoft is not just a software company but it has transitioned itself into a manufacturer.
Although Nokia CEO Stephen Elop's bold bet in 2011 to embrace Windows OS did not turn out to be rewarding to the Finnish maker, but now the acquisition by Microsoft will certainly have a huge impact in the tech world
Sandhya Vijayan, researcher with Tonse Telecom, covers social media.