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IT ALL started as a partnership of unlikely bedfellows and has turned into a marriage of convenience.
Fortunately for Microsoft and Nokia, they spent 18 months getting to know each other before tying the knot. The dowry may seem a little miserly: Microsoft is paying only $7.2bn for the Nokia devices and services business, the poor relation in a Nokia family that also includes a profitable network infrastructure business.
However, the company is worth a tiny fraction of the $245bn market capitalisation it was at a decade ago. Even in 2010, it was worth four times the $14.6bn level at which it stands today.
Microsoft, too, has seen better days. But it has still held onto at least half of its value: $278bn compared to an all-time high of $616bn in 1999. More important, it has $77bn in the bank. Only Apple has more.
The question about the deal should not have been why Microsoft would buy Nokia, but why it would NOT buy it.
Let’s face it: Nokia still makes great phones. Their entry-level phones are the best in the world, and are accessible to almost anyone in the world. Their feature phone/smartphone cross-over, the Asha range, offers smartphone functionality, a choice of keyboards and touchscreens, and a width of appeal that only Samsung can match.
Nokia’s woes are not a result of selling too few phones. They are a result of selling too few high-end phones that bring in the big profit margins. Dominating only the low end is a recipe for disaster for a company that must still invest billions in research and development.
Enter Microsoft. With an intimate knowledge of Nokia’s devices and money to burn – as opposed to Nokia’s now legendary burning platform – it is the ideal white knight to sweep the forlorn orphan off its feet.
But will this story have a fairytale ending? Will Nokia CEO Stephen Elop step in to lead Microsoft after Steve Ballmer has left? He’s to be appointed executive vice-president, setting up a neat succession plan for Microsoft.
The clue lies in Ballmer’s resignation letter to staff: he said he would have preferred to go once Microsoft was in the midst of its “transformation to a devices and services company”. That suggested the transformation had not yet begun, but that it would commence with the appointment of his successor.
And lo, along comes Nokia, in the shape of its “devices and services business”, with a CEO who has been running exactly that kind of business for several years – after joining Nokia from Microsoft.
Add in the many mobile patents Nokia holds – some of which helped shape the mobile industry – as well as key strengths like maps and navigation, a mature mobile music service, and a trusted name in emerging markets, and suddenly there’s a twist in the tale.
It may well end up being Nokia that rescues Microsoft, and not the other way round.
- Fin24
*Arthur Goldstuck is managing director of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter or Pinterest on @art2gee. Views expressed are his own.
Fortunately for Microsoft and Nokia, they spent 18 months getting to know each other before tying the knot. The dowry may seem a little miserly: Microsoft is paying only $7.2bn for the Nokia devices and services business, the poor relation in a Nokia family that also includes a profitable network infrastructure business.
However, the company is worth a tiny fraction of the $245bn market capitalisation it was at a decade ago. Even in 2010, it was worth four times the $14.6bn level at which it stands today.
Microsoft, too, has seen better days. But it has still held onto at least half of its value: $278bn compared to an all-time high of $616bn in 1999. More important, it has $77bn in the bank. Only Apple has more.
The question about the deal should not have been why Microsoft would buy Nokia, but why it would NOT buy it.
Let’s face it: Nokia still makes great phones. Their entry-level phones are the best in the world, and are accessible to almost anyone in the world. Their feature phone/smartphone cross-over, the Asha range, offers smartphone functionality, a choice of keyboards and touchscreens, and a width of appeal that only Samsung can match.
Nokia’s woes are not a result of selling too few phones. They are a result of selling too few high-end phones that bring in the big profit margins. Dominating only the low end is a recipe for disaster for a company that must still invest billions in research and development.
Enter Microsoft. With an intimate knowledge of Nokia’s devices and money to burn – as opposed to Nokia’s now legendary burning platform – it is the ideal white knight to sweep the forlorn orphan off its feet.
But will this story have a fairytale ending? Will Nokia CEO Stephen Elop step in to lead Microsoft after Steve Ballmer has left? He’s to be appointed executive vice-president, setting up a neat succession plan for Microsoft.
The clue lies in Ballmer’s resignation letter to staff: he said he would have preferred to go once Microsoft was in the midst of its “transformation to a devices and services company”. That suggested the transformation had not yet begun, but that it would commence with the appointment of his successor.
And lo, along comes Nokia, in the shape of its “devices and services business”, with a CEO who has been running exactly that kind of business for several years – after joining Nokia from Microsoft.
Add in the many mobile patents Nokia holds – some of which helped shape the mobile industry – as well as key strengths like maps and navigation, a mature mobile music service, and a trusted name in emerging markets, and suddenly there’s a twist in the tale.
It may well end up being Nokia that rescues Microsoft, and not the other way round.
- Fin24
*Arthur Goldstuck is managing director of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter or Pinterest on @art2gee. Views expressed are his own.
