It’s been more than seven months since the Redmond-based tech giant Microsoft (NASDAQ:MSFT) announced its interest in Nokia (NYSE:NOK) and finally on Friday the two companies closed the deal. April 25, 2014, marked the end for one of the greatest phone makers of the world, Nokia, and chalked out the beginning of what might be known as Microsoft Mobile.
After months of brainstorming and decision making, Microsoft was able to bring the Finnish phone maker under its belt and with this move the company will get control of nearly 90% of Windows Phone OS powered handsets across the globe. So far Microsoft has announced the cost of the deal and what it will be getting and the company intends to release a much detailed report covering several other aspects of the agreement in a weeks time.
The Numbers In The Deal
To gain access to Nokia, Microsoft had to part with a sum of Euro 5.44billion ($7.2 billion), of which Euro 3.79 billion was for the mobile phone business and the balance Euro 1.65 billion was for Nokia’s patent portfolio. Now onwards the Windows maker will be the owner of the entire range of Lumia smartphones, Asha smartphones, Google (NASDAQ:GOOG) Android powered Nokia X series and the entire range of Nokia’s feature phones.
- Warning! GuruFocus has detected 8 Warning Signs with MSFT. Click here to check it out.
- MSFT 15-Year Financial Data
- The intrinsic value of MSFT
- Peter Lynch Chart of MSFT
However, the deal doesn’t include the company’s Chennai (India) facility and Masan (South Korea) facility. Post this deal, Nokia, as we know it ends, but it will still continue to exist as it carries on other operations related to networking, location-based services and its development business.
How Nokia Fits In To Microsoft’s Goal
Industry experts and analysts have been tracking the progress and the effect of the deal for a good amount of time and the majority opinion is in Microsoft’s favor. Thanks to the deal, in terms of sales, Microsoft overnight has become the world’s second largest phone maker, after Samsung (SSNLF) and the benefits don’t end here. This is just the beginning.
Satya Nadella, the new Microsoft CEO, is taking a different and a new approach in running the company, with special focus on cloud-based services. His less rigid point of view related to working with parallel eco-systems is also working in the company’s favor. Nokia’s decision to launch a handset running a forked version of Android was probably all a part of a big plan. Microsoft plans to leverage the benefits from creating a hybrid OS by combining Android and Windows Phone. Nokia X has got all the cloud offerings from Microsoft and as more and more consumers start adopting this new lineup from Nokia, Microsoft’s share of cloud-computing market will keep growing. Even Microsoft decision to bring the Office on iPad fits very well into the strategy.
Last year Nokia sold almost 250 million handsets, majority of which were not powered by Windows Phone. Microsoft can take these handsets and put in them its cloud-based services and benefit greatly from the already developed market. Also, with Nokia’s expertise, now Microsoft can start focusing on making handsets that will be exclusive to Windows Phones, something that Apple does. It will also work to make better tablet devices with better usability that will aid its market-share growth.
Microsoft recently came out with its first quarter earnings release. Though the company topped market expectations, it’s bottom-line plunged YoY at $5.66 billion. However, now with Nokia under its belt, Microsoft may turn around the situation a lot. If it can properly leverage Nokia’s expertise and launch new, appealing and tempting devices, it will surely be able to make up most of lost ground.