Microsoft announces the acquisition of Nokia’s devices and services division as part of a $ 7.2 billion deal. This announcement comes two and a half years since these companies announced a strategic partnership in an attempt to regain market share lost to the competition.
This announcement reaffirms Microsoft’s strategy to be known as a devices and services company. Nokia not only brings with it strong brand equity in the consumer driven phone market but also gives Microsoft an enhanced access to emerging markets with an access to widespread channel partner and hardware manufacturing ecosystem. Further, this may open up possibilities for Microsoft to lower its mobile OS licensing costs, thereby bringing down the total cost of owning a mobile device.
As a part of this deal, Microsoft also gains access to Nokia’s (barring NSN) design patents and related Intellectual Property (IP), which can be leveraged to drive focused innovation around the Asha and Lumia platforms. With common kernels and closer integration between different Windows devices, it is imperative for Windows to create its own experience and speed-up innovation; their focus should be to both protect and grow their share in India.
On the other side, there arises a doubt around this acquisition on potential alienation of other OEMs that were looking to launch devices on a Windows platform. However, the official communication from Microsoft suggests that they will continue to license Windows Phones to other manufacturing partners as well. Moving forward, it will be interesting to watch how they (Microsoft) will defend their ecosystem in price competitive markets like India.
Also, the Windows apps’ ecosystem still remains nascent and the synergies around co-developing this ecosystem have not surfaced yet. It will be interesting to see how Microsoft can now leverage its combined capabilities hereafter, to gain a sizeable market share in an Android dominant Indian market. This deal also weds Microsoft’s strong enterprise presence with Nokia’s consumer focused outlook, which might lead to interesting developments around launching enterprise solutions around BYOD, provided the app ecosystem matures accordingly.
In conclusion, the acquisition has the potential to be highly beneficial to Microsoft as it would help build a stronger and wider mobile (tablet and mobile-phone) presence. But a greater benefit might be to the broader market (especially India) where the adoption of smart-phones might be accelerated and a more robust mobile app ecosystem would be formed.