Will Microsoft Pocket Nokia ? [Analysis]

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It has been months when speculations are being made about Microsoft’s biggest and latest initiative – Acquisition probability of a cellphone firm by software giant. Especially after the rollout of Microsoft’s latest mobile platform – Windows Phone 7 – Steve Ballmer, ebullient CEO of Micrososft, was surrounded by the questions on possible roadmap of such initiative in CES 2011. Though, he tried to sidestep the questions but analysts feel that time won’t be better than now for software giant to pocket a potentially capable and promising mobile firm.

As per the Industry’s experts, Microsoft can’t ( and won’t) take chance to put its enterprise acquisition brains for any recent mobile startup or low market share mobile company. Out of top cellphone firms, there are only two companies ripe for acquisition are BlackBerry maker Research in Motion (RIM) and Finnish cellphone leader Nokia.

But the big question is whether Microsoft should shell out for either of them or stick to what it knows the best – designing and selling software ? Interestingly, Steve Ballmer votes for the second option, atleast for now. One important thing in Steve Ballmer’s interview to notice was his “never-denial” attitude on possible acquisition. He took the common stand left the question open ended.

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Why is Microsoft so Desperate

Mobile market has got the big wings to fly high. Handsets manufacturers and telecom companies both are enjoying the scenario better than ever before. Smartphone market is improving and business is becoming more mobile oriented. People are expecting much more mobile dependent than ever before. Mobile apps market will be worth $35 billion by 2014. All such lucrative facts and figures are enough for Microsoft to jump.

Windows Phone 7 , apparently, is doing good and first outcome of sales figures were neither bad nor much below than expectations. Company can still bet on WP7 and with few enhancements and aggressive marketing strategy, WP7 can impress with improve market share.

However, an interesting calculation which supports the acquisition need is something to watch for. Currently, Microsoft charges $15 for each WP7 license. Going with this, company will have to sell more than 600 million licenses to make it billion dollar arm which is almost next to impossible in any course of time.

With all such scenario, the only feasible option for Microsoft is to acquire a cellphone firm with valuable market share and better handset sales figures.

Nokia Would be a Better Choice

Compare to RIM, acquisition of Nokia would be an intelligent move, feel many analysts. Today, Nokia is much more affordable than before and still holds the supremacy in mobile market. Back in 2008 / 2009, Nokia market value was estimated $50 billion which has been plunged to $38 billion due to stiff competition and market decline.

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On the other side Microsoft is hording $44 billion in cash now and is desperate to have significant market share of mobile industry. Besides, cash calculations and market figures, Microsoft and Nokia both hold a comfort factor for years. Both the companies have cooperated on enterprise mobility for years–Nokia was an early licensee of ActiveSync (Microsoft’s protocols for syncing Exchange e-mail with devices) and is the only non-Windows Phone company to support mobile versions of Office.

Despite of all recent challenges, Nokia still holds the top position in mobile market. Compare to 71 million by Samsung, whipped in third quarter of 2010, Nokia has supplied 117 million mobile phones. It’s mobile platform of Symbian which may not be so dominant, but holds the highest mobile OS market share with 36%.

However, the other target company RIM is nowhere close to such figures or facts. Going for RIM will only make sense if deal with Nokia fall flat.

Challenge

One biggest challenge Microsoft can face here is to convince Nokia, with all OS migration or transformation probability, for WP7 platform especially when Nokia is close to roll-out with new mobile platform – MeeGo with has been jointly developed by Nokia and Intel. Many Industry experts are presuming MeeGo as sole and strongest competitor of highly successful Google’s Android platform. Microsoft, an even Nokia, will find it difficult to justify the all 3 platform – Symbian, MeeGo an WP7, is such acquisition comes into effect.

Even if Microsoft can’t trigger the acquisition excitement to Nokia’s management & board members, it can replicate the move again which crafted at the time of Facebook acquisition efforts. Microsoft couldn’t grab the Facebook but was successful to form an association by investing a good amount. Indeed, that paid off handsomely and Microsoft is still enjoys various other indirect benefits which other companies, especially Google, is still struggling to feel.

We don’t know which side giant Camel is going to lean, but one thing is pretty clear: Microsoft need to make big and that big should happen fast. Hope Ballmer and Team is closely monitoring all such industry analysis and expectations.

8 COMMENTS

  1. Check the news. Nokia CEO Stephen Elop to make major strategic announcement to investors on 11-Feb in London. Maybe not an acquisition, but could it be some other form of partnership? Analysts and bloggers seem to think it’s going to be some kind of either Nokia/Microsoft or Nokia/Android pairing. And which relationship would be most beneficial to both parties, I wonder?

  2. @Debranjan Can not say this. If you see the interview of Steve Ballmer at CES 2011, CNBC asked the same question “They have heard from sources..”In response Ballmer never denied clearly. He said “Now, when does acquisition make sense? That’s a complicated subject, probably best not addressed in this interview.”The real meaning of his words is very fragile. Something is cooking up and surely, it will make sense for microsoft to go over a mobile company to save their ass !!

  3. Microsoft is not dumb…there is little strategic and operational symmetry between the 2 disparate firms, and Microsoft will not burn down it’s cash reserves over a mass market phone manufacturer such as Nokia. The rumor of Microsoft trying to acquire Adobe is far more credible than this.

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