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Microsoft Crosses the Finnish Line with New Nokia Deal

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As Apple, Google and Samsung have swept Microsoft under the carpet over the last few years, the one-time tech titan wants back onto the fast-track to play with the big boys. Although Microsoft had been working with Nokia on a Windows based phone since 2011, Microsoft felt that they had to take control of their Windows Phone platform without any middleman getting in the way of their mobile vision which is currently on crutches. Late yesterday evening, Microsoft crossed the Finnish line and acquired Nokia's Devices and Services division.


In brief, the deal breaks down as follows: Microsoft is paying 7.2 Billion for Nokia's Devices & Services division, along with a four-year exclusive partnership with HERE Maps (which Nokia retains), all of Nokia's phone brands, including Lumia and Asha, its employees, marketing materials, sales force, manufacturing facilities and trade partnerships; and a 10-year non-exclusive lease of Nokia's patents and IP.

 

In a joint open letter published on the Official Microsoft Blog late yesterday evening, Ballmer and Elop noted that "Today marks a moment of reinvention."

 

Top Nokia execs, including CEO Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber will transfer to Microsoft as employees. In total, some 32,000 Nokia employees are expected to transfer to Microsoft, including some 4,700 people in Finland, the company said.

 

Microsoft "is still behind Apple and Android-based handset devices in the global mobile phones market share but under this deal, Microsoft can start to take control of the operation and turn Nokia's declining handset business into a formidable competitor in a competitive market," said India's ETX Capital analyst Ishaq Siddiqi.

 

A Good Patent Play for Microsoft

 

According to Reuters, "Nokia has long been a savvy player in the intellectual property market. It sued Apple in 2009 and then reached a licensing deal with the iPhone maker. The terms were not disclosed but the deal was believed to be worth hundreds of millions of dollars to Nokia.

 

For Microsoft, taking a license to Nokia's patents - but not buying them - serves a strategic objective as well. Microsoft has already convinced about 20 Android manufacturers to pay patent royalties, part of Microsoft's effort to raise the cost of Google's mobile operating system.

 

Now, Nokia remains free to go after those Android manufacturers for royalties as well. 'It wouldn't surprise me at all to see litigation filed by Nokia in coming months,' said one senior IP executive who has dealt with both companies but did not want to be identified to maintain those relationships."

 

You could also read FOSS Patents report on the acquisition and get an overview of Mueller's thinking about Microsoft's patent play.

 

At the End of the Day

 

At the end of the day, time will tell if this acquisition will actually mean anything tangible for Microsoft – but it sure would be nice if they'd get serious and take Android head on. There's a desperate need for a strong second open operating system that might actually challenge the market.

 

Android is such a cheap looking toy OS that I still can't believe that they have a lead in the market. Apple could wipe them out in a nano second if they'd just licence their iOS to a few key players instead of fighting it out in the courts. If the objective was to go thermonuclear to wipe Android out of existence, then the legal approach that the late Steve Jobs took was sadly the wrong strategy. Only licensing could have achieved that and still could. But that's a broken record no one is listening to.

 

For now, if you have anything interesting to say about the Microsoft deal, please send your comments in below.

 

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Comments

Jack Purcher

Why are people so afraid of Apple working with two or three good OEM's? Apple could set the rules. Apple could work with those ready to expand iOS to other products. For instance. Samsung has the Galaxy Zoom which is likely a product that Apple will never challenge. Yet a partner like Sony could create a competing product with iOS and Apple would benefit from royalties.

Secondly, why is the Apple community so afraid of Apple giving the public a choice of hardware. Is Apple so insecure that a competing design would kill them? If you like Apple, you will always buy Apple. But those that buy technology based on their own criteria, may like iOS over Android, but prefer another OEM's hardware styling. Apple could always set retail pricing so as to not undermine the iPhone.

Anyways, I could argue this for days and it wouldn't change a single mind that is stuck in Apple's old philosophy. Apple's one time of offering licensing was a year before they were about to go under. Meaning, they were in no position to control the licensing. Apple is in a position of strength now and could have killed Android with a few strategic partners.

Why do you think Steve Jobs went ballistic when he learned about Android? Steve had prepared long and hard to kill Microsoft. And technically Apple did in the mobile space. But he didn't count on a new competing mobile phone OS from Google. He thought the courts would have stopped Google. But the courts are so damn slow that it was futile, in the big picture. Samsung may pay a billion and gained 100 billion in sales. Licencing early on, could have curbed Android's rise to power.

Cheers

Nevermark

Regarding the "broken record" of iOS licensing: Apple already has the expertise and resources to create a larger variety of iPhone form factors and price points. What would 3rd party licensees bring to the table except distraction, conflicting goals and margin pressure?

But I agree they seem to be unnecessarily leaving the market open to competitors. Why Apple is differentiating the iPhone so slowly is a mystery. Their Mac/MacBook and iPod lines have greater product variety even though they sell fewer of those.

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