Should Microsoft Consider Buying Nokia?

In a recent talk between Microsoft and Nokia, the two companies contemplated a merger. WSJ reported the story yesterday, and for quite a while, industry leaders have been cogitating on this move. Since 2011, Nokia has been in tie-up with Microsoft to use Windows Phone operating system on all of its major devices, notably the Nokia Lumia series (Lumia 920, 928, etc). This has helped both companies in great ways. Here is an analysis as to whether the merger could pave way to success to these companies.

Nokia

 

Nokia, the Finnish smartphone maker, has been quite big in the market up until Android and iOS destroyed the stronghold of its Symbian OS. Nokia subsequently fell from the top and now has the tenth position in global smartphone market with about 2.8 percent of the market, according to research firm Gartner.

Nokia market share

 

Nokia lost its stock value considerably, and the strong stock, which some time in 2007 was trading at a peak rate of 40 dollars, now trades at around 3-4 dollars. Quite a heavy fall and Nokia was slowly forgotten from being a household name. The only way the phone maker survives right now is by marketing its Lumia range of smartphones, all based on Windows Phone operating system, with a marketing pact with Microsoft that supplies it with money and motivation.

Even after so many Lumia devices, Nokia failed to stabilize its position in the smartphone market.

Microsoft

 

What about Microsoft in the world of smartphones? When most people talk about smartphones, they are thinking about iPhone or Android devices. They don’t know about other operating systems that exist out there, Firefox OS, Ubuntu, BlackBerry 10, Windows Phone, Tizen, among others.

While since 2007, Apple and Google have been dominating the smartphone operating system world, Microsoft tried to snap up a tiny portion of the market with its redesigned Windows Phone device. The design of new Windows has been revolutionary. Still, the software giant’s efforts in the smartphone world and tablet world with its own Windows RT OS have not been quite successful as you know well from our previous posts.

The company holds hardly around 3 percent of the market, just as Nokia.

Windows Phone market share

 

Microsoft gets sales only for Lumia phones, although there are other OEMs in the Windows Phone market, such as HTC with Windows Phone 8 and Samsung with its ATIV phones. Either the other manufacturers are not enthusiastic enough to promote Windows phones, or Microsoft wants to market Lumias over others.

A Merger?

 

From a merger, what could we expect? Nokia is the largest Finnish company and it contributes a huge chunk to the small country’s economy. A merger will move the mobile phone division of Nokia to Microsoft, and that division is estimated to be worth around 14 billion dollars or so. While the stock holders of Nokia may be looking for any ways to rescue the firm, it waits to be seen whether Finland, one of the strongest economies in the current European Union, would like the deal.

The merger should be in the best interests of Nokia due to a number of reasons. First of all, Nokia is not probably going to get any success by moving away from Windows Phone. Within the Android world, the only OEM that makes any money is Samsung at the top of the smartphone market. Other manufacturers, HTC, Sony, Motorola, LG, etc., are either in loss or making extremely tiny profits. It is highly unlikely in any foreseeable future to see any change in this.

The only two mobile operating systems making it big are Android and Apple iOS, and the rest of the lot have such a tiny market place. Nokia’s best bet is in staying with Microsoft Windows Phone.

About Microsoft, they are not finding success with any OEM other than Nokia. Although Samsung and HTC have made their own Windows Phone devices, they did not get anywhere. Lumia is the only Windows phone that has a noticeable presence. If Microsoft buys Nokia, they can unify the business, and probably make it big in the smartphone world. I would like to point to these major advantages if the companies merge:

  • Why Apple and BlackBerry are revered so much? They make their own hardware and software. If all parts of the phone are in control of the OEM, the resulting device tends to be of absolute quality. With a smartphone hardware division, Microsoft will probably be able to rise to the level of Apple and BlackBerry in hardware software compatibility.
  • Nokia has one of the best hardware divisions, along with a bunch of absolutely valuable mobile patents in various mobile technologies. A merger can probably save these assets and subsequently benefit Microsoft too.
  • Just as in the case of Windows 8 and Surface, Microsoft can take advantage of other OEMs for Windows Phone. It is not that with a merger with Nokia, Microsoft is shutting its options for other mobile OEMs. If the merger becomes successful and Windows Phone prospers, other OEMs will be interested in making handsets with Microsoft.
  • Nokia’s purchase price could be really low and quite affordable for Microsoft. Nokia has been working on its strategies and strengthening its position in the market in the last few months though.
  • Nokia has never made a tablet, but under the aegis of Microsoft, it might be tempted to give it a shot, and that might create an interest among users. With such a cool design team that made Lumia 920, Nokia is sure to hit the jackpot with a cool tablet design.

Argument against the merger is also quite strong. For one thing, people believe Nokia has a chance if it moves away from Windows and diversifies its options. I would really love to get my hands on a Nokia Android device, if it ever happens. But as mentioned earlier, it is extremely difficult to be successful alongside Samsung.

Microsoft is interested only in smartphones, and not Nokia’s diverse feature phone business. Microsoft may spend unnecessary money in acquiring that feature phone business too.

Conclusion

 

Although there are a few arguments against MS acquiring Nokia, it seems quite a bit sure that the merger is in favor of both companies. The future will show us whether they decide on it or not. In whatever case, it should be an improvement over the status quo.