News Piece on acquisition of Nokia by Microsoft

Piece for KnowYourMobile Job - 1/11/2013

Microsoft moved firmly into the hardware market this week with the announcement that they are set to buy Nokia’s mobile phone business for $7.2bn (£4.6bn).  The deal will also see Nokia license its patents and mapping services to Microsoft.

The merger is perhaps the logical conclusion of a partnership which began in February 2011 and has already enjoyed some success with Nokia’s generally well-received Lumia smartphones.

Despite all but dominating the mobile phone arena as recently as six years ago, Nokia have struggled to remain competitive in a smart phone market in which they currently only have a 3% share. 

Microsoft has also been sluggish to respond to the tablet revolution and have failed to establish themselves as a leading innovator in the wake of the rise of Apple.  Their Surface tablet was released last year but was met with unenthusiastic sales figures resulting in a whopping write down on unsold tablets of around $900 million.

Both companies will hope that by integrating Microsoft software with Nokia hardware the Windows Phone will be able to compete against the Apple and Android operating systems which currently dominate the market. 

By running an integrated operating system across their phone, tablet and desktop devices Microsoft believe they have spotted a hole in the market that Apple, who run different OS on their Mac and I-devices, have failed to address. 

Microsoft consider this integration across phone, tablet and PC will persuade app developers to develop for Microsoft OS - seen as a key step in getting one over on Apple. 

By combining hardware and software development new Windows Phone devices will also be produced faster and with better integrated apps which many regard as a key factor in Apple’s recent success.

Questions will be raised over whether other phone manufacturers such as HTC, LG and Samsung will continue to support the Microsoft Windows system, given that it will now be synonymous with a major competitor.  With Nokia already accounting for over 80% of the Windows Phone market it’s likely that this may simply be a calculated risk the company is willing to take.

The impact of the merger also raises questions over the long term sustainability and practicality of firms such as HTC and Blackberry being able to survive as solely phone makers in the fast changing technology market.