Today’s news that Microsoft will buy Nokia in early 2014 sent the Scandinavian telco giant’s shares soaring by some 45%. But while the stock market may have been buoyed by the news of the acquisition many are still to be convinced of the business thinking behind the move.
As a brand name, Microsoft remains iconic. Yet it, too, has struggled to make inroads into the mobile space; too slow, say some, to respond to market demand. The sales of its Surface tablets (most charitably described as sluggish) highlighting this significantly.
At the same time, Nokia has struggled against competition from Samsung and Apple with sales falling 24% in the three months to June, compared to last year.
The question on the lips of many industry analysts and consumers alike is: will the partnership of two relatively also-rans in terms of the mobile and OS space really be the answer to rivalling the likes of Apple and the Android OS?
Some believe that the sale of Nokia (an established 150 year old company) for the relatively paltry sum of $7 billion is tantamount to a ‘fire sale’, and others have questioned the move as a last role of the dice for Steve Bulmer; aiming to leave a legacy in the mobile space before his immanent departure from office.
Look more closely however and there may be more than one reason (the share price of Nokia) to believe Microsoft has pulled out a proverbial rabbit from the hat.
First, the partnership formed in 2011 placed the Windows Phone (WP) operating system in Nokia’s Lumia devices, and sales of Lumia have seen WP’s global market share rise to 3.3% – actually out performing former mobile heavy weights BlackBerry.
Secondly, Microsoft has a history of making astute acquisitions that have ultimately strengthened its overall market offering: it purchased aQuantive, an advertising company, on August 13, 2007 for $7.3 billion. A/Razorfish, one of the world’s largest digital agencies the same year; Norwegian enterprise search company Fast Search & Transfer to boost its search technology in 2008, and most recently in 2011 it acquired Skype for $8.5 billion.
Finally, despite not cracking the mobile market in the way he would have envisaged Bulmer still remains, first and foremost, a winner. He simply doesn’t back the wrong horse when it comes to significant business decisions.
One last point to leave you to ponder: who would have believed (apart from Steve Jobs & Paul Wozniak) during the late 90s when Apple brought out the iMac with its coloured back, that it would be the company it is today with all its influence and success? With this in mind, maybe Bulmer and co might just have the last laugh after all!