Uncertain Channel Strategy as Microsoft Acquires Nokia
Uncertain Channel Strategy as Microsoft Acquires Nokia by UCStrategies Staff
Microsoft has acquired the fading phone giant Nokia in a $7.2 billion deal that will strengthen the company’s mobile device strategy. It will support the next wave of smartphone users to enter the Windows ecosystem using Nokia smartphones. According to the CEO Steve Ballmer, the acquisition “cements a partnership put in place two-and-half years ago,” adding, “we have a long way to go.”
A former Microsoft executive supposed to be most likely to replace Ballmer as Microsoft CEO, Stephen Elop, will step down as Nokia CEO as a result of the acquisition, and push the Microsoft devices effort as executive vice president of devices and services.
Elop stated that the goal of his team is to “bring a rich array of Microsoft services to first-time smartphone users as we create an on ramp [sic] to Windows phones for people that are having their first smartphone experiences.” The joint Microsoft and Nokia move will “increase our share in smart devices through faster innovation, through better products and through unified branding and marketing,” he added.
Ballmer noted there were three reasons for the Nokia purchase. Firstly, acquiring a mobile hardware partner it had close ties with would provide valuable mobile patents and licenses. Secondly, it will be possible to convert lower-end feature phone users to Windows Phone 8 smartphones. Both Ballmer and Elop said that a strong mobile strategy will keep its Windows ecosystem healthy.
Ballmer stated: “Nobody buys hardware for hardware. And it's sometime hard to get real end users to buy services without buying hardware.” Microsoft, according to Ballmer, has “a powerful lineup of first-rate mobile services to deliver,” such as Office, Skype, SkyDrive, Bing and Xbox entertainment services.
Microsoft acquires the Lumia brand and products as part of the deal, and this includes 8,500 key patents and access to an existing Nokia licensing agreement with companies like Qualcomm.
Ballmer said: “We are pleased to be acquiring the full capabilities of Nokia and phones from its mobile phones, smart devices, engineering, marketing, to supply chain management.”
As Microsoft strengthens its mobile device strategy by purchasing Nokia hardware and patents, few details have been provided about how this move will affect channel strategy moving forward.
Ballmer commented: “More success with phones helps our OEM tablets and PC business. Now we have a flagship product to blaze a trail in this market. It's a different model than the PC model, but I'm pretty excited about how we can balance our own first-party hardware and get support and help that’s important from our OEMs.”
The integrated devices organization at Microsoft will be run in conjunction with Nokia's research and development division in Finland, and Elop will oversee this. The new executive vice president of Microsoft’s Devices and Studios division, Julie Larson-Green, will report to Elop.
There are no plans at present for Microsoft to alter development efforts of Microsoft products on iOS and Android platforms, but Ballmer said that Microsoft needed to ensure a more fully controlled hardware and software development for a “first-class experience on those platforms.” He added that Microsoft was cautious of submitting to the whims of Apple or Google with regards to porting services and software to their mobile platforms.
Ballmer noted: “We will support iPhone and Android and Galaxy phones with our services. We are not holding back services from other phone vendors' platforms in any way. However, we run the risk of Google or Apple foreclosing on our ability to innovate and integrate our applications.”
He added: “The successful investment in Windows Phone 8 and Windows ecosystem should help raise the tide in everything we do. We know that tide helps attract application developers. And we recognize the gaps we have in applications in the ecosystem today, particularly with Windows phones.” (CY) Link