Microsoft acquires Nokia's phone division, patents for $7.2 billion: will it target the Middle East for sales?
Today, Microsoft has agreed to buy Nokia’s devices and services
unit for 5.44 billion euros (US $7.2 billion), its first foray into
handset manufacturing.
In an all-cash deal, Microsoft will pay Nokia 3.79 billion euros
for its devices division, acquiring its Lumia line, which already
runs Windows 8. It will also pay 1.65 billion euros to license
Nokia’s patents, including those for its lower-end feature phones,
for 10 years.
The move will see Nokia CEO Stephen Elop return to Microsoft, where
he previously served as head of business, bringing with him the
32,000 Nokia employees who work in the devices division (They won’t
physically relocate, however; Finland will remain the hub for
Microsoft’s phone R&D).
After Google’s purchase of Motorola’s handset division last year,
this deal is the largest for a wireless device maker
worldwide. It also makes Nokia the last of the early handset
manufacturers to be acquired, after the Google-Motorola deal and
Sony’s purchase of Ericsson’s manufacturing division, and it means
that Microsoft will finally join Google and Apple in manufacturing
its own handsets.
For Nokia, the deal is one of its few remaining options; while it
dominated the global market in 2007, accounting for 40% of mobile
phones sales and 49% of the smartphone market, in 2013, it had
plummeted 14.8% of global market share, and less than 3.8% of the
global smartphone market, according to Gartner.
As low cost cellphones in Asia challenged its feature phone sales
and Apple and Google took over the smartphone market, Nokia slowly
choked.
Now, Microsoft’s hope will be to accelerate sales of Nokia’s Lumia
line, which debuted the Windows 8 Mobile OS in 2011 and hit a
record 7.4 million units sold in Q2 this year,
beating out Blackberry sales.
While reports note that Nokia’s stock surged 40% following the
news, most
analysts don’t expect the deal to necessarily rescue the ailing
company.
Should Microsoft tailor new phones for an Arabic
audience?
In the Middle East, Nokia still dominates market share, and
might be a target as Microsoft looks to boost sales.
“[The] Middle East plays [a] really important role because the
Middle East and Africa is that area where we have, relative to
other regions, a stronger position market share wise,” Elop
told The National in early 2012.
Last year, Nokia Symbian devices led the region in smartphone
sales, according to
Gartner, yet this year, after Nokia dumped Symbian, its share
of the smartphone market in the region plummeted to 3.7%.
In the regional smartphone market, Android still leads, with 40%
market share, while Nokia Windows Phones, at 10%, lag behind both
Apple (35%) and Blackberry (15%).
With Blackberry up for sale, Windows Phone might be able to surge
into third this year; perhaps the acquisition will see Microsoft
focus a bit more on the Middle East as a prime market.
After all, it will have to sell 50 million smartphones a year to break even on an operating basis, while Nokia currently has a run-rate of around 30 million units. Those extra 20 million units will have to come from somewhere; perhaps an Arabic interface would help.