It was a silly move. Stratechery possibly said it best with an article titled, “The Deal That Makes No Sense“. For their part, Microsoft has taken the initiative to defend the $7.2 billion bid for Nokia by putting out a justification document and having a conference call about it.
Neither were very compelling.
Don’t misunderstand – Microsoft needed to do something to enhance their chances of surviving in the smartphone industry. Their Windows Phone line of smartphones have performed well behind Apple and Android devices despite having a nicely received interface and software functionality. However, Nokia’s phone business was the last thing they needed to buy.
They already had a stronghold there without having to pay out so much. The two-year-old partnership has been rocky, but that’s no reason to acquire them. If anything, it would have been better to acquire something else or expand their partnerships with other phone-makers rather than take on a business that hit its peak almost a decade ago.
Their rationale as stated in the document and conference call:
- Accelerate phone share – Yes, this deal will do that. It just won’t do it as quickly as it would have had they spent the money on a company with which they didn’t already have a partnership.
- Strengthen overall opportunity – Nope. This does not put them in a stronger position. It puts them even deeper down the Nokia hole that wasn’t working out very well in the first place.
- Smart acquisition – With the patents and technology, this part is true. Overall it was a bargain price because of the longer history but recent trends are positive.
- Strong execution plan – This is the wildcard and may be the main reason for the acquisition. We’ll never know for sure, but one would hope that this portion, the part that is the least public, has some upside that most simply cannot see at this time. If this part of the deal is exceptional and if Microsoft is able to take full advantage of it, then the overall deal might be justifiable. Those are big ifs.
Here’s the document itself on Docstoc.
nonsense, this is a very sound acquisition. They’ve now got complete control of the technology that they basically forced Nokia to build for them. The Lumia with WP8 are good phones capable of competing with androids and iphones. Now they own the hardware they can reproduce the unification iphones and ios enjoy and side step the fragmentation that android suffered (and still does) from.
This is not only positive from a user experience point of view but also better profit margins per device and the ability to accelerate development with no hindrance.