Software major Microsoft has revealed its strategies behind the $7.1 billion acquisition of Nokia phone business.
In a presentation to select media, Microsoft CEO Steve Ballmer said the strategy is to increase its device and OS business in the long run.
The $7.1 billion acquisition will enable Microsoft to become more closer to both Google and Apple. Google paid $12 billion to buy Motorola which was not a #2 phone maker in the world at the time of the acquisition. Google paid huge money for Motorola’s patents. But the $12 billion cash payment is yet to reflect in Google’s revenue streams.
The operations that are planned to be transferred to Microsoft generated an estimated EUR 14.9 billion, or almost 50 percent, of Nokia’s net sales for the full year 2012.
This means, Microsoft paid much lesser to Nokia.
Though the Nokia deal, Microsoft will acquire Nokia’s phone business; Nokia’s Qualcomm and other key IP licenses; Microsoft licenses Nokia’s patents for use across all Microsoft products; Microsoft licenses ability to use Nokia HERE broadly in its products.
Nokia Windows phone has more than 10 percent share in 9 key smartphone markets. It is outselling BlackBerry, which is looking for a buyer, in 34 markets. Nokia Windows phone shipments rose 78 percent.
Microsoft is looking at accelerating phone share and strengthening overall opportunity.
The software major considers this as a transformation from beyond software and PCs.
Microsoft says Nokia acquisition brings a family of devices with integrated services that best empowers people and businesses for the activities they value most.
Greater smartphone success strengthens Microsoft and its OEMs. High value services including geospatial are key for long term growth.
Microsoft already offers Office, Skype, Xbox, Live, SkyDrive, Bing at Microsoft. It says Geospatial and mapping are essential to integrate for mobile. It wants an effective alternative to Google. Nokia Here will be the solution. Nokia can maximize HERE use by others. Microsoft gets flexibility to integrate HERE with other experiences.
Microsoft acquired rights equivalent to ownership for the HERE mapping apps. Nokia will continue to improve these apps for other platforms. Nokia will provide Microsoft with mapping data services in exchange for annual payments. Microsoft can combine Nokia mapping data with data from other sources. Microsoft can syndicate Nokia’s data to customers using Windows Azure for additional fees.
Microsoft presentation says devices help services and services help devices.
With the consumerization of IT, users matter at both home and work. Devices and high volume/value services are ways to build a large user base.
Microsoft will continue to support iPhone and Android/Galaxy phones with our services. “But we cannot risk having Google or Apple foreclose app innovation, integration, distribution, or economics. We need a first-rate Microsoft phone experience for users,” Microsoft CEO said.
Microsoft will also take additional steps to promote the app ecosystem for Windows.
In addition, the acquisition protects Windows Phone future.