Microsoft buys Nokia: Five things we know, and one key question

Can Microsoft's move give Windows Phone the boost it needs?

Microsoft has bought Nokia's smartphone and mobile business for 5.44 billion so we've taken a look at what it means for the companies involved, for Windows Phone, and for the mobile market as a whole. See also: Microsoft to acquire Nokia's mobile phone business.

"Building on the partnership with Nokia announced in February 2011 and the increasing success of Nokia's Lumia smartphones, Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing," it said in a statement.

1. An inevitable move

Nokia went all-in with Microsoft with Windows Phone and it seemed inevitable that eventually one would buy the other; the initial phase of the partnership being a tester for this prospect. Nokia took the plunge, opting not to continue with Symbian or to go with Android, but it's now Microsoft's job to make Windows Phone work. See also: BlackBerry up for sale: 5 reasons it went wrong.

"With mobile now firmly positioned as the world's fastest growing and largest computing platform we see this move as a bold, but entirely necessary gamble by Microsoft. Mobile needs to be a cornerstone of Microsoft's business for future success. The failure of Microsoft's platform-only approach over the last 15 years, initially with Windows Mobile and more recently with Windows Phone, has left it with few alternatives given its almost complete reliance on Nokia for Windows Phone devices and the competitive eco-system strength of Google and Apple." said Ben Wood, chief of research at CCS Insight.

2. Windows Phone 8's last roll of the dice

Windows Phone is a distant third place to Apple's iOS and Google's Android. And although Windows Phone has just overtaken BlackBerry in the standings, this has got to be the last, and necessary, roll of the dice for the platform.

With Nokia the key partner in the Windows Phone wagon, and little effort from the likes of HTC and Samsung, a consolidated effort is a necessary gamble for the operating system and its bid to be the 'third ecosystem'.

3. Microsoft is becoming a hardware manufacturer

It's clear that Microsoft is no longer a software company and is quickly following in the footsteps of Apple and Google (which bought Motorola) by combining software and hardware. Aside from Surface and Xbox (a mixed bag of successfulness) this is Microsoft's biggest plunge into device making yet, with the transfer of 32,000 Nokia employees.

4. The app battle is over

A major part of the fierce smartphone battle is the apps on offer. If the only serious hardware maker in the Windows world is Microsoft, who is going to bother to make Windows Phone apps? Future Windows Phones will no-doubt come pre-loaded with Microsoft and Nokia apps but there needs to be more on offer than a base selection.

It's interesting to note that Nokia is keeping its 'Here' mapping and location services which it plans to make available "across different screens and operating systems". That's one key advantage Windows Phone could have that Microsoft isn't buying.

"Handset markets are commoditising. The action is in software, apps, and soon these will be delivered online. The emergence of html5 is an early indication. Smartphones will then turn into mere windows to the cloud. There will be little that differentiates one black, rectangular touchscreen phone from another, besides perhaps screen quality and battery life. Handset manufacturers without a suitable software platform in the cloud stand to suffer and Nokia is right to divest of its phone business. Blackberry should do the same. As for Microsoft, it remains to be seen whether it can leverage its still significant strength in desktop operating systems and software and migrate its customers to the mobile cloud." said Ronald Klingebiel, assistant professor of strategy at Warwick Business School.

5. Elop to replace Ballmer

Steve Ballmer has announced that he will step down as Microsoft's CEO in a year's time so could Nokia's Stephen Elop be his replacement? It seems like a likely scenario with Elop stepping down from his current position to be executive vice president of devices & services, and will join Microsoft once the acquisition is complete. "Stephen will go from external [candidate] to internal" Ballmer told The Seattle Times.

And... Will all Windows Phones be Nokias?

Nokia has always been the main player in the Windows Phone market. Other vendors making Windows Phone handsets alongside Android device, namely Samsung and HTC, have clearly lost interest. We've seen no new Windows Phone handsets from them and it seems unlikely they will continue to fight for the cause.

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Tags business issuessymbianMicrosoftNokiaMergers and acquisitions

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Chris Martin

PC Advisor (UK)

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