American multinational software corporation Microsoft bought Finnish conglomerate Nokia for $7.2 billion (5.44billion Euros).As part of the agreement, Nokia CEO and President Stephen Elop is stepping aside; he was Nokia’s executive vice president of devices & services reporting to interim CEO Risto Siilasmaa, previously chairman of Nokia’s Board of Directors. Under the deal, Microsoft is buying the “Lumia” and “Asha” brand names that Nokia has used for its smart and intermediate phones. It has licensed the use of the Nokia brand on handsets for ten years, but the Finnish business will continue to manage and retain ownership of the brand. That most likely means the Nokia brand will fade from handsets in the next decade, ending over 30 years’ history in the business. For $7.2 billion, Microsoft bought its way into the category of “Devices and Services Company”. This deal will give Microsoft the kind of end-to-end control in mobile sector that only Apple and BlackBerry have enjoyed.”For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter” said Risto Siilasmaa, chairman of the Nokia Board of Directors, who now takes over as the interim chief executive of the remaining parts of Nokia. This deals means that Blackberry’s best probability of being acquired by Microsoft is over. Microsoft will be more aggressive than Nokia in pursuing enterprises. Apple and Samsung now have a new player in the battle for smart phones.
Nokia starting in 1865 with a pulp mill in the Finnish town of Tampere reinvented itself continually shifting to rubber boot production early in the 20th century, and then making its way upto first telephone exchange in the 1970s. Its first mobile phone appeared in 1981.In 1990, Nokia sold off its non-mobile divisions and launched its first digital handheld GSM phone, the Nokia 1011.Since then Nokia was the leading mobile manufacturer till Apple and Samsung came into the picture. Windows first handset phone Lumia 710 and 800 was launched by Nokia in October 2011 tactical leap taken by new chief executive Stephen Elop ditching its home grown Symbian and Meego smart phone software. Many Finnish observers accused him of being a “Trojan Horse” for Microsoft.
The reason for Nokia’s drastic measures was simple: Finance, for Microsoft it was: Reinvention. Microsoft said that operating break-even is 50m units, a long way off at current growth rates. So, they felt something had to change. The acquisition solves Nokia’s problem (running out of cash) and hence is a strategic jump by Microsoft. It prevents the only significant Windows Phone OEM from exiting the market. Known the force of the top two companies Microsoft openly acknowledged that it needs a “first-rate Microsoft phone experience for users” to compete.
Microsoft has more precise goals for its Nokia devices acquisition. It’d like to boost its smart phone share around four times what it has now that is to 15 percent by 2018!
Only time will tell if this deal will led to Microsoft emerging as a smart phone giant !
