Microsoft and Nokia – is it actually happening? Why? Is Nokia actually leaving the market? These are a few questions people have asking since quite a few days. The news about Nokia being sold out to Microsoft has been viral all over the world. This is yet another great thing been taken over by Microsoft which will eventually demolish the company’s real sense and Nokia’s real identity. This shift in its market by Microsoft is probably another step to compete with Apple and Google. Well, the market is full of appreciations and criticisms for both Microsoft and Nokia.
Let’s see what this acquisition brings out for the world!
Microsoft and Nokia
The tech giant Microsoft is on its way to purchase Nokia’ Devices & Services unit which has caused sudden changes in the company’s stock. The deal revolves around $7 Billion. This unexpected change is credited over Stephen Elop by many of Finns. He is being criticized for taking away the best part of Nokia from the company. However, in the present scenario and condition of Nokia, this appears to be the best decision.
Why is Microsoft purchasing Nokia?
Since Microsoft had a hard time making Windows Phone a viable success, it opted to make a deal with Nokia and take over its Devices & Services. The shareholders do find this decision worth criticizing as they believe such huge investment is a great risk for the company. However, if you think about the plans in the long-run, this might benefit the company quite a lot. By acquiring Nokia, Microsoft has established strong grounds in the smartphone market along with transforming into the hardware manufacturer just like Apple and Google. Microsoft believes to make $40 per smartphone unlike its previous earning $10 on a single smartphone. In order to compete with Apple, Microsoft has made a very wise move! According to Steve Ballmer,
We think we have made excellent, excellent progress with the partnership and yet we also know we have a long way go and felt on balance that together this is the best approach for both companies’ shareholders.
Why did Nokia agree to the Deal?
Since Microsoft is the buyer, did you think why Nokia agreed to it? Well, this was probably the best and last option for Nokia to make something out of its dying mobile devices so it took advantage of its last breath. As compared to its peak days which made Nokia’s worth around $200 Billion, these $7 Billion are just peanuts to them. Their market shares decreased from 40% to just 15%. This is the main reason why Finnish Company’s people are criticizing Stephen Elop. They believe him to be a Trojan Horse who came into Nokia, devalued it and sold out to Microsoft. The Finns are totally in disagreement to the decision. However, this is the best Nokia could do for now!
Stephen Elop believes:
It’s very clear to me that rationally this is the right step going forward
Though he added he also felt a great deal of sadness over the outcome.
I feel sadness because inevitably we are changing Nokia and what it stands for.
What will Nokia focus on now?
Nokia, after selling its heart to Microsoft, will now focus on it networking solutions and navigation business along with the patents. This will be more like what happened with Ericsson. This news rapidly increased the shares as the Finnish phone makers received good news after years. Some believe this is the burning platform for Nokia after looking at its continuous decline in the market.
What the World has to say?
According to Juha Varis, Danske Capital’s Senior Portfolio Manager,
As a Finnish person, I cannot like this deal. It ends one chapter in this Nokia story. On the other hand, it was maybe the last opportunity to sell it.
A column in widel read tabloid IIta-Sanoma states:
Jorma Ollila brought a Trojan horse to Nokia.
Alexander Stubb, Finland’s Minister for European Affairs and Foreign Trade, gets very emotional upon this deal and says:
For a lot of us Finns, including myself, Nokia phones are part of what we grew up with. Many first reactions to the deal will be emotional.
Another investor, Varis said:
So this is the outcome: the whole business for 5 billion euros. That’s peanuts compared to its history.
An analyst at Pohjola Bank – Hannu Rauhala remarks:
What should be paid for a declining business, where market share has been constantly lost and profitability has been poor? It is difficult to say if it’s cheap or expensive.
Well, half of the world is happy with the deal while the rest keep criticizing. Since, nobody can predict the real outcome so let’s wait and watch what Microsoft and Nokia plan to do. All for now!