With its long-tenured CEO retiring and an ongoing transition to becoming a "devices and services" company, Microsoft has taken another major step in acquiring Nokia's mobile unit for $7.2 billion.
As part of the agreement, set to close in the first quarter of 2014, Nokia's current CEO Stephen Elop is returning to Microsoft to lead its Devices team. Speculation has immediately swirled around him as a primary candidate to take over from Steve Ballmer as Microsoft CEO, however all parties remain tight-lipped on the matter. As to the future roadmap, Microsoft wants the deal announced today to help it triple Windows Phone's mobile marketshare by 2018, though it still remains committed to its other hardware partners for the platform. Stay on top of all developments in this expanding narrative by following this stream.
One of the most enticing "what-ifs" of recent years has come true: Microsoft has purchased Nokia's Devices and Services unit, bringing the Lumia lineup under the Redmond roof. The move unites Windows Phone 8 with its biggest hardware supporter, giving the company the integrated mobile offering it's been looking for with Surface and other devices. When the deal closes in the first quarter of 2014, Microsoft will pay 3.79 billion Euros for Nokia's business, plus another 1.65 billion Euros for its portfolio of patents. (The 5.44-billion Euro total is considerably less than Microsoft paid for Skype in 2011.) 32,000 people are expected to transfer from Nokia to Microsoft, including 18,300 that are "directly involved in manufacturing."
The purchase comes on the heels of what appeared to be a failed acquisition in June, at which point it seemed conversations had broken off entirely. Now the two come together, in what outgoing Microsoft CEO Steve Ballmer called "a bold step into the future." In an email, Ballmer cited the Lumia 1020 as an example of what the companies could do together, but said the phone hadn't caused the marketshare bump it deserved. "Now is the time to build on this momentum and accelerate our share and profits in phones," he wrote.
Asha will be an on-ramp to Windows Phone
A driving force behind the sale seems to be Nokia's low-end Asha brand, which Microsoft has acquired outright. Asha gives Microsoft a far larger footprint for Windows Phone, and access to millions of customers in developing countries that it plans to use as an "on-ramp to Windows Phone." The emphasis also lends some credibility to the notion that Nokia's high-end strategy isn't working — analysts predicted a horrific Q3 for the company, and its struggles to find a foothold are well-documented. In fact, Microsoft's licensing deal for the Nokia brand doesn't include future Lumias — Nokia as a smartphone brand is effectively dead, as Microsoft takes the lineup in-house.
Nokia's days as a smartphone brand are over
Though Nokia was by leaps and bounds Microsoft's best hardware partner for Windows Phone 8, EVP of Operating Systems Terry Myerson was careful to note that Microsoft's purchase doesn't come with nepotism. As Google has with Motorola, Myerson promised every partner would be treated the same, even quoting a song by The Killers to make his point. And from Huawei to HTC, there are still other partners — Nokia's coming in-house, but Windows Phone 8 isn't being walled off.
Its device business now gone, Nokia's plan is to focus on three core technologies: NSN (its network infrastructure) HERE (its maps and location-based services); and Advanced Technologies (a licensing and development arm). Microsoft will pay Nokia for a four-year license of the HERE services, bringing the new company more revenue and stability than it had previously. But it also makes Nokia a much smaller company.
Stephen Elop is going back to Microsoft
As part of the agreement, Nokia CEO Stephen Elop is stepping aside; he's now leading Microsoft's Devices team. That puts him in an odd position with Julie Larson-Green, who Ballmer said will be joining his team, but will also be responsible for other hardware like Surface and the Xbox One. The exact scope of Elop's role isn't exactly clear, and with a soon-to-be-vacant CEO seat we expect plenty of rumors to fly as the acquisition closes. Risto Siilasmaa was named Nokia's Interim CEO — he was previously chairman of the company's Board of Directors.
For $7.2 billion, Microsoft bought its way into the category of "devices and services company." It gives Microsoft the kind of end-to-end control in mobile that only Apple and BlackBerry have enjoyed (to varying success), and a critical measure of quality control. But can Microsoft succeed where Nokia failed? Was Nokia holding Windows Phone back, or was Windows Phone the problem? The big questions aren't going away, but maybe now we'll get answers.
The HTC One Max alongside our image of the HTC One and HTC One mini. Its plastic and aluminum body has more in common with the mini than the One.
