Susan Smith has worked as an editor and writer in the technology industry for over 16 years. As an editor she has been responsible for the launch of a number of technology trade publications, both in print and online. Currently, Susan is the Editor of GISCafe and AECCafe, as well as those sites’ … More »
Microsoft moves to acquire Nokia
September 4th, 2013 by Susan Smith
It looks as though Microsoft Corp. is moving into a paradigm shift with its move toward a $7 billion acquisition from Nokia to thrust it into the mobile market. Nokia will still remain a company after Microsoft buys the company’s handset business. While Microsoft is acquiring what Nokia is best known for, the Finnish company is holding on to two if its major businesses: networking and mapping. Microsoft has been hoping to take a slice of the mobile market from smartphone moguls Apple and Google, and meanwhile has been partnering with Nokia for three years.
Microsoft’s position in the smartphone industry worldwide is a distant No. 3, and mobile software accounts for approximately 4% of the market. Comparatively Apple and Google software garner 90% of that market.
Steve Ballmer is planning to retire from Microsoft within 12 months, and it is looking like Stephen Elop, the former Microsoft executive who was running Nokia until the deal was signed, will rejoin Microsoft after the Nokia deal goes through. He may also be in line for the CEO position after Ballmer retires as he is very familiar with the Microsoft line of products and the move toward mobile.
Ballmer said he thinks Microsoft needs to become a hardware vendor instead of making other vendors responsible for creating the hardware that Microsoft software runs on. Some industry experts believe this is a no-win acquisition for Microsoft and Nokia, as Microsoft has never been a hardware manufacturer and has not garnered much traction in the smartphone market. Nokia’s smartphones were around before the iPhone, and at one time they were the largest cell phone maker, yet they could never make a good enough smartphone to compete with Apple and Samsung. In 2013, Samsung took over the role as the largest smartphone maker.
The plan to purchase Nokia may create waves with other companies the employ Microsoft Windows phone OS on their devices (such as Samsung), but that is not a substantial amount of business.
Ballmer thinks that Google and Apple do not have a permanent monopoly on the smartphone mobile business. Microsoft’s first attempt at their own computer, the Surface tablet, which was designed to take the iPad market – from those who were disgruntled with the low computing power of that product, has not been successful after its launch last year. Last quarter, Microsoft took a $900 million charge for unsold Surface inventory.
With Nokia being a Finnish company, Microsoft can use a portion of its foreign-held cash to pay for the acquisition, avoiding high taxes that would be levied if the cash was brought back to the U.S. The largest deal in Microsoft’s history, the acquisition of Skype, was handled in much the same way.