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Microsoft’s greatest battle

microsoft buys nokia devices
  • On March 10, 2014

When Microsoft reached an agreement with Nokia to buy its mobile unit for 7.2 billion dollars, Redmond was expected to justify its decision in front of investors and there were two main arguments for the acquisition deal. First of all, Apple and Google had their own hardware divisions, and second, Nokia’s devices would ensure the long-term development of Windows Phone.

But the landscape is changing rapidly. Last month, Google announced selling Motorola to Lenovo for $2.91 billion. Then Nokia unveiled new plans to make low-budget Android phones (Nokia X), targeting emerging markets. Now Microsoft’s new CEO, Nadela, Sathya, must answer several urgent questions: how justified is the acquisition of Nokia after the actions of Google? And how Microsoft expects to survive in a market which has proved to be hard even for Redmond’s greatest rival? The biggest problem for Microsoft is that most customers have already selected their favorite operating system … and it is not Windows Phone.

In an email to employees, Sathya Nadela commented: “our job is to make sure that Microsoft is developing in a mobile world where cloud services are becoming more popular.” It’s hard to imagine exactly how the software giant will evolve in the cloud business without a strong presence in the mobile market. And with $83 billion in cash available, the acquisition of Nokia’s Devices seems like a modest investment.

The collaboration between Windows Phone and Nokia has failed to make a great impact so far. Although Lumia sales jumped twice to 8.2 million compared with 2012, the overall sales are still like a drop in the ocean for the competition. Samsung sold ten times more for the same time period (86 million units), while Apple sold around 51 million. Huawei (16.6 million) and Lenovo (13.3 million; before the deal with Google) also beat Nokia’s global sales.

Without Nokia’s commitment to Windows Phone, Microsoft would have become an endangered species in the mobile jungle. Redmond does not have to worry about competing with manufacturing partners like HTC – it is simply too small. But the purchase of Nokia’s entire mobile division at least wins some time for Microsoft. “Microsoft needs to understand how Windows works on mobile devices,” commented a market analyst. “And it’s a lot easier when you have an entire mobile Division available.”