Microsoft To Buy Nokia's Mobile Phone Unit
Microsoft has agreed a deal to buy Nokia's
mobile phone business for 5.4bn euros . Nokia will also license its patents and
mapping services to Microsoft. Nokia shares jumped 35% on the news, whereas
Microsoft's fell more than 5%. The purchase is set to be completed in early
2014, when about 32,000 Nokia employees will transfer to Microsoft. Nokia has
fallen behind rivals Samsung and Apple, while critics say Microsoft has been
slow into the mobile market. Describing the deal as a "big, bold step
forward", Microsoft chief executive Steve Ballmer told the BBC that his
company was in the process of transforming itself from one that "was known
for software and PCs, to a company that focuses on devices and services". "We've
done a lot of great work in the two-and-a-half years that we've been in
partnership with Nokia, going literally from no phones to 7.4 million smart
Windows phones in the last quarter that was reported," he said. But he
admitted: "We have more work to do to expand the range of applications on
our product."
Microsoft,
one of the biggest names in the technology sector, has struggled as consumers
have shunned traditional PCs and laptops in favour of smartphones and tablet
PCs. Critics say the firm has been too slow to respond to the booming market
for mobile devices. It launched its Surface tablet PCs last year, but sales of
the devices have been relatively slow. Analysts said that the company wanted to
make sure that it got its strategy right in the mobile phone market. "Mobile
is an area of tremendous potential but it has been one of weakness for
Microsoft," Manoj Menon, managing director of consulting firm Frost &
Sullivan, told the BBC. "Clearly the number one priority for the company
is to get its mobile strategy right. From a strategy point of view, this deal
is the perfect step, The only question is how well they can execute this
plan." Ben Wood, an analyst at telecoms consultancy CCS Insight, said:
"It's a necessary gamble by Microsoft to break into mobile, but given its
complete reliance on Nokia for Windows Phone devices and the competitive
position of Apple and Google with rival phone platforms an understandable move.
"It completely reshapes Microsoft's business pushing it firmly into
hardware. But it also raises big questions about the sustainability of other
firms, including HTC and Blackberry, remaining pure-play phone makers," he
added.
Nokia was once a leader in mobile phones, but
the firm's sales fell 24% in the three months to the end of June from a year
earlier. It sold 53.7 million mobile
phones during the quarter, down 27% on last year. However, sales of its new
Lumia phones, which run a Microsoft operating system, rose during the period. Mr
Menon said that the deal between the two companies would help to bring the
"hardware closer to the operating system and achieve a tighter
integration". "This should help Microsoft make a more effective
strategy to compete in the mobile sphere," he said. Microsoft has also
agreed a 10-year licensing arrangement with Nokia to use the Nokia brand on
current mobile phone products.
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