nokia and microsoft merger case study

Microsoft Corporation’s Acquisition of Nokia Case Study

The Microsoft Corporation purchased the Nokia phone business in 2014 for approximately $7.2 billion. Although Nokia could be labeled as a profitable business during that time, it was a downstream customer for Microsoft. Thus, it was unclear whether the deal was beneficial for Microsoft since Nokia was not even a leader in the mobile phone industry.

The issue that Microsoft had to resolve was the negotiation process between the companies as the negotiators were from different cultural origins: Microsoft is an American company, while Nokia is a European (Finnish) one. What is more, the strategies and aims of both companies were different: while Microsoft was trying to become present in the mobile phone market, Nokia wanted to be provided with a serious capital that could help it deal with expensive operations and productions. However, it should be noted that negotiations between the two companies took place before Microsoft acquired Nokia: in 2011, the Windows 7 Platform was presented on Nokia phones. At first, the companies only cooperated to develop new devices and products. Only three years after the first cooperation Nokia was purchased by Microsoft. This decision implies that this type of partnership was profitable for both companies at first.

Another problem of these negotiations is the fact that companies often do not see their counterparts as individuals; thus, one of the companies (Nokia) had to abandon its identity to receive benefits from the synergetic deal. However, as it can be seen from the case study, Windows phones were not as popular as it was expected and did not bring Microsoft visible presence and recognition in the mobile phone market, where Apple and Android were the main leaders.

While the deal might appear as unprofitable at first, it may present some benefits in the long run. Nevertheless, Microsoft is not the first company that chose to purchase a “downstream customer” in order to target a new market where the corporation was not present. Acquiring a company that is not a leader anymore can be a risky decision, and, in Microsoft’s case, it led to a reduction in the value of the company. Moreover, it also brought little benefit to Nokia, although the Finnish company had expected other outcomes. While Microsoft tried to resurrect the former leader in the mobile phone market, Nokia experienced losses and thousands of job cuts due to Microsoft’s workforce management policy in 2014. Thus, the deal was not as profitable as both companies had expected.

One question remains to be answered: why did Microsoft decide to involve in this deal if it was clear that the deal was not profitable? On the one hand, this deal was unlikely to harm Microsoft’s core business. On the other hand, the corporation tried to present a new product (Windows Phone) by purchasing a (once stable) company in decline – not an entirely new approach. It can work if the odds are in your favor. However, as it can be seen, Windows Phone cannot compete with iPhones and Android devices, and Microsoft’s presence in the smartphone market is still relatively small. Android is capable of expanding because this operating system can be installed on multiple devices from various manufacturers (Samsung, LG, Lenovo, Huawei, etc.). Windows 7 and 8 for mobile phones are mostly used on Nokia smartphones that cannot compete with Samsung, not to mention other companies. Thus, Microsoft’s acquisition of Nokia was unprofitable. It is possible to assume that this deal will bring more additional losses in the future.

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IvyPanda. (2020, November 11). Microsoft Corporation's Acquisition of Nokia. https://ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/

"Microsoft Corporation's Acquisition of Nokia." IvyPanda , 11 Nov. 2020, ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/.

IvyPanda . (2020) 'Microsoft Corporation's Acquisition of Nokia'. 11 November.

IvyPanda . 2020. "Microsoft Corporation's Acquisition of Nokia." November 11, 2020. https://ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/.

1. IvyPanda . "Microsoft Corporation's Acquisition of Nokia." November 11, 2020. https://ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/.

Bibliography

IvyPanda . "Microsoft Corporation's Acquisition of Nokia." November 11, 2020. https://ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/.

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Microsoft, Nokia, and the burning platform: a final look at the failed Windows Phone alliance

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When Microsoft acquired  Nokia’s Devices and Services division in late 2013 and began integrating the storied Lumia brand into its offerings, it was hailed by Microsoft’s then-CEO Steve Ballmer as “a bold step into the future — a win-win for employees, shareholders, and consumers of both companies.”

Since then, Microsoft has folded much of its $7.5 billion acquisition into other divisions of the company, laid off thousands of former Nokia employees, slashed its output of smartphones per year, and eventually wrote off the entire purchase in a $7.6 billion impairment charge. Fast forward to early 2016, when we will soon see a  quiet launch of what’s widely believed to be the final Microsoft Lumia-branded handset, the Lumia 650 .

(According to Microsoft watcher Paul Thurrott , what remains of the Lumia division has been shifted over to the Surface team, but the eventual branding of their final products is unknown .)

It’s easy enough, with the benefit of hindsight, to lament that many of these billion-dollar acquisitions end up failing to deliver shareholder value or operational synergy. But unlike other failed mergers — and despite Ballmer’s rosy assessment of the situation — this was a corporate coupling that many observers correctly predicted would fail. Rather than being done to achieve some shared vision, at the time both Nokia and Microsoft were backed into a corner and saw the other as their only potential savior.

Why did this happen? Both companies could have avoided such a point of desperation — but once Microsoft and Nokia tied their fates together in a wide-ranging 2011 partnership, failure was all but inevitable. How these two stalwarts developed an ultimately fatal codependency offers yet another cautionary tale about billion-dollar corporate mergers. As in life, there are no sure things.

A Trojan horse?

Some critics have likened former Nokia CEO Stephen Elop to the mythological Trojan horse, in the aftermath of Nokia’s failed efforts to employ Windows Phone (and only Windows Phone) to boost sales. After all, Elop was a Microsoft executive from 2008 through 2010 before taking over the helm at Nokia , and his relationships there very likely paved the way for Nokia’s big gamble on a platform with tepid market share.

Make no mistake: Despite Nokia’s then-declining market share, it was Microsoft that was, strategically, in the relatively worse position. Windows Phone was not performing nearly as well as it had hoped, and the conventional wisdom stated that a tie-up with a popular handset maker could give it the necessary cachet, and jump-start, that it so desperately needed.

As it turned out, a situation more akin to the opposite of that conventional wisdom is how things actually transpired.

Even though Windows Phone is a well-regarded operating system, it faced a chicken-or-egg conundrum when it came to apps. Developers don’t want to devote resources to a platform without a significant user base, but consumers don’t want to invest in devices until they can offer a minimum threshold of popular applications.

Nokia got stuck in the middle of this tug-of-war. The Finnish handset manufacturer, under Elop’s leadership, adopted Windows Phone but soon proved unable to sell enough devices to convince app developers to contribute to the Windows Phone platform. Eventually Nokia itself became a victim of the apps tug-of-war.

As Nokia’s fortunes fell and Microsoft grew more anxious about Windows Phone, a tie-up took on urgency. Nokia had one foot out the door, tentatively exploring entry-level Android-powered phones in a bid to stay afloat after bleeding cash for several years in a row.

Microsoft needed its only major hardware partner to stay faithful if it hoped to remain in the mobile platform business, and was willing to pay $7.5 billion for fidelity. Almost overnight, Steve Ballmer became the white knight Nokia needed. But there was more to the deal. One unusual aspect to the arrangement: Instead of Nokia waving goodbye to its division, CEO Elop moved over as well , returning full circle to his former employer as the new chief of Microsoft Devices.

The burning platform

In 2011, market share of Android surpassed that of Nokia’s Symbian OS, despite being launched just two years earlier. During that same time frame, Apple enjoyed explosive growth of its iPhone OS, whose 2007 introduction roiled an industry caught off-guard by its arrival.

Nokia was slow to react to the newfound competition. In his now infamous “ Burning Platform ” speech, delivered to employees just prior to announcing the Microsoft partnership in early February 2011, Elop acknowledged that the company’s traditional strategy of competing device-to-device at various price points had failed.

The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications, and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyze, or join an ecosystem.

Elop’s chosen ecosystem was, of course, Windows Phone. Nokia launched its first two handsets — the Lumia 800 and Lumia 710 — in late October 2011, nearly a year after adopting the platform. Microsoft, too, had forced its fans to wait 8 months (February to October 2010) between announcing Windows Phone 7 and the release of the first wave of compatible devices.

Both gaps would prove to be problematic, especially for Microsoft, due to the fact that Windows Phone apps would not be compatible with the Windows Mobile handsets that it had been promoting up to that point. Perhaps the shift from a handset way of thinking to a broader ecosystem model was a larger undertaking than both companies anticipated.

The road not taken

So, might things have turned out differently for Nokia if it had picked another route? Windows Phone was far from its only option, of course. Android should have been an obvious candidate. Nokia, at the time, was familiar with the operating system. Android would eventually power its short-lived line of Nokia X devices.

However, there were other possible directions. MeeGo , a homegrown Nokia OS that made it to retail on a single phone — the N9 — would have been the fan favorite. However, despite generally positive reviews in the press and from owners, its release after the “Burning Platform” inflection point relegated it to being merely a curiosity. And Symbian Series 60 , which had powered the vast majority of the company’s smartphones, had virtually no market share in the U.S. — by that point considered a critical mobile market for the company.

So, let’s assume that instead of Windows Phone, Nokia had become an Android partner instead. It’s far from given that adopting the Android OS alone could have righted the ship; after all, many Android OEMs — and there are a lot of them — struggle to make a profit as commoditization overtakes the industry. Still, I have to believe that they could have sold more Android handsets than they did Windows Phones. How many more is unknown, but simply going by the market share that each platform has had over the past five years, I suspect it would have been a pretty healthy increase.

In the end, Nokia hoped that Windows Phone would make it stand out in a sea of Android and iOS devices — and it did, but not in the fashion it had wanted. Instead, Nokia customers watched their once-mighty brand slowly fade into irrelevance, eventually getting consumed by its ill-chosen partner.

The mobile landscape is littered with manufacturers who lost their way, from Palm to BlackBerry to HTC to Danger. No company is too big to fail, and those that react too slowly to shifts in tastes and preferences can quickly find themselves struggling to catch up. Often, the only path forward requires choosing from a set of unpalatable options. Thanks in part to Stephen Elop’s Rolodex, Nokia’s storied handset division wound up in the arms of Microsoft, a fatal embrace.

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Microsoft wasted at least $8 billion on its failed Nokia experiment

By Tom Warren , a senior editor covering Microsoft, PC gaming, console, and tech. He founded WinRumors, a site dedicated to Microsoft news, before joining The Verge in 2012.

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Microsoft is taking another almost $1 billion hit on its failed Nokia acquisition today. The software maker is "streamlining" its smartphone business, writing off $950 million and cutting 1,850 jobs . The cuts come almost a year after Microsoft wrote off $7.6 billion and cut 7,800 jobs. Only a small number of former Nokia employees will remain at Microsoft, and the company's consumer phone making days are over.

Microsoft has wasted at least $8 billion on its failed Nokia experiment, including the costs of restructuring and severance payments for thousands of employees. Microsoft originally hired 25,000 Nokia employees as part of its $7.2 billion acquisition of Nokia's phone business, but a series of layoffs over the past two years has triggered the end of Microsoft's mobile subsidiary.

Nadella was never interested in running a phone business

Microsoft's Nokia phone business acquisition was always tricky and risky, but it was a deal organized by former CEO Steve Ballmer. It has been clear from the start that Satya Nadella, Microsoft's new CEO, wasn't interested in running a phone business. Nadella announced a strategy shift away from a "devices and services" focus just a couple of months after the Nokia acquisition finalized, and last year the strategy shifted even further away from producing multiple handsets.

Many will argue Microsoft had no choice, as Nokia controlled more than 90 percent of the Windows Phone market and had been rumored to be considering switching to Android. Google's experiment with making its own Android phones resulted in the search giant selling Motorola to Lenovo for $2.91 billion , less than two years after paying $12.5 billion to acquire it. While Google's investment was primarily driven by the need to obtain key patents, it's not clear how Microsoft has benefited from its Nokia deal.

We might not ever know the true reasons for Microsoft's Nokia phone business acquisition, but right now it's clear the company has wasted billions of dollars on a failed experiment to try and claw its way back into the mobile market. Microsoft might be preparing a Surface phone, but if it ever debuts it will only cater to the very few who are interested in phone versions of Windows, and it's not going to be enough to reverse Windows Phone's decline. For everyone else, Microsoft's phone making experiment is truly over.

CEO Satya Nadella’s vision for Microsoft

Sonos is teasing its ‘most requested product ever’ on tuesday, inside microsoft’s mission to take down the macbook air, two students find security bug that could let millions do laundry for free, microsoft’s surface and windows ai event live blog: it’s arm time, the new, faster surface pro is microsoft’s all-purpose ai pc.

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18 Microsoft’s Acquisition of Nokia

• Published: June 2022
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In September 2013, US-based computing major, Microsoft Corp. (Microsoft) and Finland-based communications company, Nokia Corporation (Nokia), announced that both the companies would enter into a transaction where Microsoft would acquire Nokia’s devices and services segment, Nokia’s patents and license and use Nokia’s mapping services, for US$ 7.2 billion. Earlier in February 2011, Nokia had entered into a strategic alliance with Microsoft in a bid to combine the traditional strengths of the two companies to create synergies. With the acquisition of Nokia, Microsoft aimed to build on its partnership with the former by accelerating the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing. The case analyses and highlights the acquisition strategy from the strategic fit perspective as well as the benefits/advantages envisaged by both the companies.

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Microsoft to acquire Nokia’s devices & services business, license Nokia’s patents and mapping services

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REDMOND, Washington and ESPOO, Finland – Sept. 3, 2013 – Microsoft Corporation and Nokia Corporation today announced that the Boards of Directors for both companies have decided to enter into a transaction whereby Microsoft will purchase substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services.

Under the terms of the agreement, Microsoft will pay EUR 3.79 billion to purchase substantially all of Nokia’s Devices & Services business, and EUR 1.65 billion to license Nokia’s patents, for a total transaction price of EUR 5.44 billion in cash. Microsoft will draw upon its overseas cash resources to fund the transaction. The transaction is expected to close in the first quarter of 2014, subject to approval by Nokia’s shareholders, regulatory approvals and other closing conditions.

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. For Nokia, this transaction is expected to be significantly accretive to earnings, strengthen its financial position, and provide a solid basis for future investment in its continuing businesses.

“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services,” said Steve Ballmer, Microsoft chief executive officer. “In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution.”

“We are excited and honored to be bringing Nokia’s incredible people, technologies and assets into our Microsoft family. Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we anticipate a smooth transition and great execution,” Ballmer said. “With ongoing share growth and the synergies across marketing, branding and advertising, we expect this acquisition to be accretive to our adjusted earnings per share starting in FY15, and we see significant long-term revenue and profit opportunities for our shareholders.”

“For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter,” said Risto Siilasmaa, Chairman of the Nokia Board of Directors and, following today’s announcement, Nokia Interim CEO. “After a thorough assessment of how to maximize shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders. Additionally, the deal offers future opportunities for many Nokia employees as part of a company with the strategy, financial resources and determination to succeed in the mobile space.”

“Building on our successful partnership, we can now bring together the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing and manufacturing,” said Stephen Elop, who following today’s announcement is stepping aside as Nokia President and CEO to become Nokia Executive Vice President of Devices & Services. “With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.”

Nokia has outlined its expected focus upon the closing of the transaction in a separate press release published today.

TERMS OF THE AGREEMENT

Under the terms of the agreement, Microsoft will acquire substantially all of Nokia’s Devices and Services business, including the Mobile Phones and Smart Devices business units as well as an industry-leading design team, operations including all Nokia Devices & Services-related production facilities, Devices & Services-related sales and marketing activities, and related support functions. At closing, approximately 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide. The operations that are planned to be transferred to Microsoft generated an estimated EUR 14.9 billion, or almost 50 percent of Nokia’s net sales for the full year 2012.

Microsoft is acquiring Nokia’s Smart Devices business unit, including the Lumia brand and products. Lumia handsets have won numerous awards and have grown in sales in each of the last three quarters, with sales reaching 7.4 million units in the second quarter of 2013.

As part of the transaction, Nokia is assigning to Microsoft its long-term patent licensing agreement with Qualcomm, as well as other licensing agreements.

Microsoft is also acquiring Nokia’s Mobile Phones business unit, which serves hundreds of millions of customers worldwide, and had sales of 53.7 million units in the second quarter of 2013. Microsoft will acquire the Asha brand and will license the Nokia brand for use with current Nokia mobile phone products. Nokia will continue to own and manage the Nokia brand. This element provides Microsoft with the opportunity to extend its service offerings to a far wider group around the world while allowing Nokia’s mobile phones to serve as an on-ramp to Windows Phone.

Nokia will retain its patent portfolio and will grant Microsoft a 10-year license to its patents at the time of the closing. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services. In addition, Nokia will grant Microsoft an option to extend this mutual patent agreement in perpetuity.

In addition, Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four-year license.

Microsoft will also immediately make available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible notes that Microsoft would fund from overseas resources. If Nokia decides to draw down on this financing option, Nokia would pay back these notes to Microsoft from the proceeds of the deal upon closing. The financing is not conditional on the transaction closing.

Microsoft also announced that it has selected Finland as the home for a new data center that will serve Microsoft consumers in Europe. The company said it would invest more than a quarter-billion dollars in capital and operation of the new data center over the next few years, with the potential for further expansion over time.

NOKIA LEADERSHIP CHANGES

Nokia expects that Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber would transfer to Microsoft at the anticipated closing of the transaction. Nokia has outlined these changes in more detail in a separate release issued today.

EXTRAORDINARY SHAREHOLDERS MEETING

Nokia plans to hold an Extraordinary General Meeting on November 19, 2013. The notice of the meeting and more information on the transaction and its background are planned to be published later this month.

PRESS CONFERENCE

Nokia will host a press conference today, Tuesday, Sept. 3, at 11 a.m. EEST in Dipoli, Espoo (Otakaari 24). Registration will start at 10 a.m., and the doors will open at 10.40 a.m. Due to space constraints, only media who show valid press credentials at the registration will be admitted. Media are encouraged to watch a live webcast of the press conference at: http://press.nokia.com/

INVESTOR CALLS

Microsoft will hold a conference call for investors, financial analysts and news media Tuesday, Sept. 3, at 3:45 p.m. EEST/8:45 a.m. EDT. Interested parties should call toll-free at (888) 459-9165, or for international calls dial +1-773-799-3324. You may also access the call online at http://www.microsoft.com/investor .

Nokia executives will hold an investor call at 3 p.m. EEST today, Tuesday, Sept. 3. A webcast of the conference call will be available at http://investors.nokia.com. Media representatives can view the webcast or listen in at +1 706 634 5012, conference ID 45390451.

MEDIA ENQUIRIES

Nokia Communications Tel. +358 7180 34900 Email: [email protected] www.nokia.com

Microsoft Rapid Response Team, Waggener Edstrom Worldwide, +1 (503) 443-7070, [email protected]

FORWARD-LOOKING STATEMENTS: NOKIA

It should be noted that Nokia and its business are exposed to various risks and uncertainties and certain statements herein that are not historical facts are forward-looking statements, including, without limitation, those regarding: A) the planned sale by Nokia of substantially all of Nokia’s Devices & Services business, including Smart Devices and Mobile Phones (referred to below as “Sale of the D&S Business”) pursuant to a purchase agreement between Nokia and Microsoft (referred to below as “Agreement”); B) the closing of the Sale of the D&S Business; C) obtaining the shareholder approval for the Sale of the D&S Business; D) receiving timely, or at all, necessary regulatory approvals for the Sale of the D&S Business; E) expectations, plans or benefits related to or caused by the Sale of the D&S Business; F) expectations, plans or benefits related to Nokia’s strategies, including plans for Nokia with respect to its continuing business areas that will not be divested in connection with the Sale of the D&S Business; E) expectations, plans or benefits related to changes in leadership and operational structure; F) expectations and targets regarding our operational priorities, financial performance or position, results of operations and use of proceeds from the Sale of the D&S Business; and G) statements preceded by “believe,” “expect,” “anticipate,” “foresee,” “sees,” “target,” “estimate,” “designed,” “aim”, “plans,” “intends,” “focus,” “will” or similar expressions. These statements are based on management’s best assumptions and beliefs in light of the information currently available to it. Because they involve risks and uncertainties, actual results may differ materially from the results that we currently expect. Factors, including risks and uncertainties that could cause these differences include, but are not limited to: 1) the inability to close the Sale of the D&S Business in a timely manner, or at all, for instance due to the inability or delays in obtaining the shareholder approval or necessary regulatory approvals for the Sale of the D&S Business, or the occurrence of any event, change or other circumstance that could give rise to the termination of the Agreement; 2) the potential adverse effect on the sales of our mobile devices, business relationships, operating results and business generally resulting from the announcement of the Sale of the D&S Business or from the terms that we have agreed for the Sale of the D&S Business; 3) any negative effect caused by us entering into the Sale of the D&S Business, as we may forego other competitive alternatives for strategies or partnerships that would benefit our Devices & Services business and if the Sale of the D&S Business is not closed, we may have limited options to continue the Devices & Services business or enter into another transaction on terms favorable to us, or at all; 4) our ability to effectively and smoothly implement planned changes to our leadership and operational structure or maintain an efficient interim governance structure and preserve or hire key personnel; 5) any negative effect from the implementation of the Sale of the D&S Business, which will require significant time, attention and resources of our senior management and others within the company potentially diverting their attention from other aspects of our business; 6) disruption and dissatisfaction among employees caused by the plans and implementation of the Sale of the D&S Business reducing focus and productivity in areas of our business; 7) the amount of the costs, fees, expenses and charges related to or triggered by the Sale of the D&S Business; 8) any impairments or charges to carrying values of assets or liabilities related to or triggered by the Sale of the D&S Business; 9) potential adverse effect on our business, properties or operations caused by us implementing the Sale of the D&S Business; 10) the initiation or outcome of any legal proceedings, regulatory proceedings or enforcement matters that may be instituted against us relating to the Sale of the D&S Business; and, as well as the risk factors specified on pages 12-47 of Nokia’s annual report on Form 20-F for the year ended December 31, 2012 under Item 3D. “Risk Factors.” and risks outlined in our most recent interim report. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Nokia does not undertake any obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

Forward-Looking Statements: Microsoft

This press release contains forward-looking statements, which are any predictions, projections or other statements about future events based on current expectations and assumptions that are subject to risks and uncertainties. The potential risks and uncertainties include, among others, that the expected financial and other benefits from the Nokia transaction may not be realized, including because of: our inability to close the transaction, or Nokia’s inability to repay the financing should it take down the financing and the transaction doesn’t close; the response to the acquisition by the customers, employees, and strategic and business partners of Nokia’s Devices & Services business; the extent to which we achieve anticipated operating efficiencies and cost savings, and anticipated smart device and mobile phone market share targets; the overall growth rates for the smart device and mobile phone markets; ongoing downward pressure on prices for mobile devices; unanticipated restructuring expenses; any restrictions or limitations imposed by regulatory authorities; the impact of Microsoft management and organizational changes resulting from acquisition of Nokia’s Devices & Services business; the ability to retain key Nokia personnel; our effectiveness in integrating the Nokia Devices & Services business with Microsoft’s businesses; the response of existing Microsoft smart devices original equipment manufacturers; risks related to the Nokia Devices & Services international operations; and our ability to realize our broader strategic and operating objectives. Actual results may differ materially from the forward-looking statements because of these and other risk and uncertainties of our business, which are described in our filings with the Securities and Exchange Commission (“SEC”), including our Forms 10-K and 10-Q.

For further information regarding risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/investor .

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Microsoft Acquisition of Nokia: An Analysis from Strategic and Financial Perspective*

Case Preview

Microsoft acquisition of nokia: an analysis from strategic and financial perspective.

”We are excited and honored to be bringing Nokia’s incredible people, technologies and assets into our Microsoft family. Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we anticipate a smooth transition and great execution. With ongoing share growth and the synergies across marketing, branding and advertising, we expect this acquisition to be accretive to our adjusted earnings per share starting in FY15, and we see significant long-term revenue and profit opportunities for our shareholders.”

– Steve Ballmer, Microsoft’s CEO

“Building on our successful partnership, we can now bring together the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing and manufacturing, with this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.”

– Stephen Elop, Nokia’s CEO

“Microsoft will record a charge in the fourth quarter of fiscal 2015 for the impairment of assets and goodwill in its Phone Hardware segment, related to the Nokia Devices and Service business.”

On 3 rd September 2013, Microsoft Corporation (NASDAQ:MSFT) and Nokia Corporation (HEL:NOKIA) entered into a joint venture (JV), whereby Microsoft Corporation (Microsoft) acquired all of the Device and Service business of Nokia Corporation (Nokia) through an all-cash deal. The Microsoft-Nokia JV was the 2 nd largest merger in the history of Microsoft after the acquisition of Skype Technologies, the VOIP innovators, for $9.2 billion...................

An Overview of Nokia

The Finnish company “Nokia” began its operation in 1865 as a single paper mill at Tammerkoski Rapids in south-western Finland. Over the years, Nokia has nurtured success in several sectors including paper products, rubber boots and tiers, cable, mobile devices and telecommunications infrastructure equipment. Nokia entered the Device and Telecommunication industry with the motto of “connecting people” through its cutting edge technology. As early as 1980, Nokia became a household name around the world with the launch of Nordic Mobile Telephone (NMT), world’s first international cellular network with international roaming supported. The Nokia brand emerged as an undisputed leader in the mobile phone industry due the reliability, easy usage, higher resale value and durability of the devices.............

Insights into Nokia

Nokia was one of the largest manufacturers of mobile phones with world-acclaimed strategy and brand name. Nokia invested almost 14% of its revenue in Research and Development as a fundamental component of competitive advantage and sustainability. However, the company’s landscape began to change gradually post-2008. Nokia’s premier product lines were based on “Symbian”, an Operating System (OS) which was considered obsolete as compared to the modern counterparts such as iPhone OS (iOS) and Android. Apart from the technical limitations, Symbian OS prevented people or companies unrelated to the mobile manufacturing...........

An Overview of Microsoft

Microsoft is the world’s leading producer of computer software and is considered to be one of the most valuable brands in the world by Forbes magazine. Microsoft was incorporated in 1981, but it came into existence in 1975 when founder Bill Gates and Paul Allen saw an opportunity in operating system after the launch of Altair 8800 (microcomputer) by an American electronics company known as Micro Instrumentation Telemetry Systems (MITS)..............

Insight into Microsoft

Microsoft is a unicorn in the office productivity software and desktop operating system. The Windows OS itself has a total market share of about 88%, which includes Windows XP/Vista/7/8 and 10. This shows how predominant Microsoft is. Microsoft has become a household name across nations. Its brand awareness is extremely high..............

Global Smartphone Market

According to Gartner, the year 2013 saw a record sale of smartphones, 968 million units were sold, a whopping 42.3% increase from 2012 (Exhibit II). The smartphone market was rising exponentially and every player wanted a piece of this cake. Many new Chinese players emerged in the market..........

Rationale of the deal

Microsoft acquisition of a part of Nokia’s business was a strategic alliance where both the companies would work strategically to achieve common goals. Microsoft had nil to limited experience in manufacturing physical smartphone and needed strong.........

Strategic expectations of Microsoft

What was the rationale behind Microsoft buying out Nokia’s handset and service division?

• Improving market share: Microsoft believed that the acquisition will help them accelerate its market share and profits in the phone market as millions of new users were waiting to buy a new smartphone. Before the acquisition, Nokia and Windows phone had more than 10% share in 9 markets and it was outselling Blackberry (then, a very popular company) in 34 different markets. Lumia phones had started gaining popularity and it believed that the imaging capabilities of Nokia could drive more success to them.......... • .............

Financial Expectations of Microsoft

• A much better profit per unit: Under the previous partnership, Microsoft was earning less than $10 per unit and this earning had to support the entire marketing investment and platform payment support. But after the acquisition, a gross margin of more than $40 was expected with a breakeven in 50 million smart devices. • ..................

Strategic Expectations of Nokia

Smartphone business reached a phase where the big players (Google and Apple) dominated the market with their strong ecosystems while the rest were either making losses or breaking even at best 26. At this juncture, Nokia had partnered with Microsoft. Leading business experts analyzed the rationale behind the deal from Nokia’s perspective.............

Financial Expectations of Nokia

• The ultimate objective of Nokia was to increase the revenue generation from Nokia’s mobile devices segment besides an increased market share under the global smartphone market. • .............

Reflections of the Acquisition

It is evident from Exhibit VI that Microsoft financials showed a steep decline. A write-off of $7.5 billion of goodwill and asset impairment charges related to phone hardware and $2.5 billion of integration and restructuring expenses, primarily costs associated with Microsoft’s restructuring plans, which affected the overall business of Microsoft...........

The Way Forward

The recent 18,000 job cuts (12,500 from Nokia), restructuring charges of $960 million and impairment charges of $7.6 billion to Nokia Device segment by Microsoft gives a clear indication that the Microsoft acquisition of Nokia was a clear blunder. The prime reason behind such strategic collaboration is for the shared synergistic benefits derived by participating organizations.................

Exhibit I: Operating Systems and their Market Shares in 2009 and 2010

Exhibit II: Worldwide Smartphone Sales to End Users by Vendor in 2013 (Thousands of Units)

Exhibit III: Worldwide Smartphone Sales to End Users by Operating System in 2013 (Thousands of Units)

Exhibit IV: Smartphones Revenue Predictions/Opportunity

Exhibit V: NPV Predictions by Microsoft

Exhibit VI: Comparative Analysis of Financial Parameters

Teaching Note Preview

The case set in 2014, depicts the dynamics of multinational business ecosystem with US tech giant Microsoft Corporation (MSFT), aspiring to be the leader in the Services and Devices industry, by acquiring the handset business of Nokia Corporation (HEL: NOKIA). The case study, through minute detailing and multi-dimensional market analysis, will help the students understand the implications of the deal from the strategic and financial perspective.

The Global Smartphone Industry is highly competitive with ever-changing technological landscape. The business strategies of the companies are evolving to cater the emerging global smartphone market. Multiple companies globally consider merger and acquisitions as the best strategic tool for effective growth and shareholder’s wealth maximization. The analysis of the case using tools and techniques such as SWOT, PESTEL, Porter’s Five Forces Model, etc. will provide analytical reasoning for strategic intent of the acquisition. To understand the financial impact, the comparative analysis of the financial parameters such as Return on Total Assets, Return on Capital Employed, Return on Equity, Gross Profit Margin, Net Profit Margin, Debt to Equity Ratio and value of the companies pre- and post-merger can be adopted and the impact of the financial ratios on the balance sheet and visa-versa can be discussed. The case can be used to analyze and highlight the acquisition strategy form the strategic fit perspective, the benefits/advantages envisaged by both the companies.

In order to enrich the understanding of the students and develop logical approach for solving complex case studies, mergers & acquisition of other companies in the same decade could be studied and inferences could be drawn for case comparison. The students can come up with their own version of strategies and their financial impact under such scenarios...............

US tech giant Microsoft Corporation (NASDAQ:MSFT), in 2014 announced its acquisition of the Finnish communication company – Nokia Corporation’s (HEL: NOKIA) handset division for $7.2 billion. Microsoft Corporation (Microsoft) aspired to be the leader in the services and devices industry. However, by July 2015, the profitability ratios for Microsoft such as Return on Assets (ROA), Return on Equity (ROE), Return on Invested Capital (ROIC), Gross Profit Margin (GPM), Net Profit Margin (NPM) have shown a decline from 2014 to 2015. Besides, EPS figure has also declined from 2014 to 2015.

The objective of this case study is to understand the implications of the deal from the Strategic and Financial perspective. To highlight the financial impact, the case presents a comparative analysis of the financial parameters such as ROA, ROCE, ROE, GPM, NPM, Debt to Equity (D/E) Ratio, pre and post-merger valuations of the companies, etc. The case analyzes and highlights the acquisition strategy from the strategic fit perspective as well as the benefits/advantages envisaged by both the companies.

Pedagogical Objectives

• To understand the concept of M&A and its implications on strategy, technology, marketing, and financial intents, IP acquisition and licenses
• To understand the role of PESTEL factors and SWOT analysis in strategic decision making
• To understand financial implications of the strategy on a business by discussing financial parameters such as ROA, ROCE, ROE, GPM, NPM, D/E, EPS etc.

Case Positing and Setting MBA Program – Mergers and Acquisitions course – To understand certain concepts of Finance and Strategy

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Microsoft completes its acquisition of Nokia

As previously reported , today marks the day when Nokia and Microsoft ceased being two parties with similar goals evolved around Windows Phone. Both companies have fired out press releases detailing the finalization of the deal seeing Microsoft absorb the phone business from Nokia.

From today, Nokia will be formed of HERE, Nokia Solutions & Networks, as well as further developments. The handset side of Nokia will now be part of Microsoft. Nokia's Devices and Services unit has been sold to Microsoft for €5.44 billion (US$7.3 billion) and will be renamed as Microsoft Mobile Oy. Stephen Elop, pictured above with Microsoft CEO Satya Nadella, will move to Microsoft to lead the hardware division.

Check out the Microsoft press release below.

Source: Microsoft , Nokia

Microsoft Corp. announced it has completed its acquisition of the Nokia Devices and Services business.

The acquisition has been approved by Nokia shareholders and by governmental regulatory agencies around the world. The completion of the acquisition marks the first step in bringing these two organizations together as one team.

"Today we welcome the Nokia Devices and Services business to our family. The mobile capabilities and assets they bring will advance our transformation," said Microsoft CEO Satya Nadella. "Together with our partners, we remain focused on delivering innovation more rapidly in our mobile-first, cloud-first world."

Reporting to Nadella is former Nokia President and CEO Stephen Elop, who will serve as executive vice president of the Microsoft Devices Group, overseeing an expanded devices business that includes Lumia smartphones and tablets, Nokia mobile phones, Xbox hardware, Surface, Perceptive Pixel (PPI) products, and accessories. Microsoft welcomes personnel with deep industry experience in more than 130 sites across 50 countries worldwide, including several factories that design, develop, manufacture, market and sell a broad portfolio of innovative smart devices, mobile phones and services. As part of the transaction, Microsoft will honor all existing Nokia customer warranties for existing devices, beginning April 25, 2014.

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Windows Phone is the fastest-growing ecosystem in the smartphone market, and its portfolio of award-winning devices continues to expand. In the fourth quarter of 2013, according to IDC, Windows Phone reinforced its position as a top three smartphone operating system and was the fastest-growing platform among the leading operating systems with 91 percent year-over-year gain.1 Furthermore, with the Nokia mobile phone business, Microsoft will target the affordable mobile devices market, a $50 billion annual opportunity,2 delivering the first mobile experience to the next billion people while introducing Microsoft services to new customers around the world.

Microsoft will continue to deliver new value and opportunity, and it will work closely with a range of hardware partners, developers, operators, distributors and retailers, providing platforms, tools, applications and services that enable them to make exceptional devices. With a deeper understanding of hardware and software working as one, the company will strengthen and grow demand for Windows devices overall.

As with any multinational agreement of this size, scale and complexity, Microsoft and Nokia have made adjustments to the deal throughout the close preparation process. As announced previously, Microsoft will not acquire the factory in Masan, South Korea, and the factory in Chennai, India, will stay with Nokia due to the tax liens on Nokia's assets in India that prevent transfer. As a result, Microsoft will welcome approximately 25,000 transferring employees from around the world.

More information about Microsoft's expanded family of devices and services is available here.

Founded in 1975, Microsoft (Nasdaq "MSFT") is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

Microsoft refers to Microsoft Corp. and its affiliates, including Microsoft Mobile Oy, a subsidiary of Microsoft. Microsoft Mobile Oy develops, manufactures and distributes Lumia, Asha and Nokia X mobile phones and other devices.

For further information regarding risks and uncertainties associated with Microsoft's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of Microsoft's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft's Investor Relations department at (800) 285-7772 or at Microsoft's Investor Relations website.

All information in this release is as of April 25, 2014. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

Rich Edmonds was formerly a Senior Editor of PC hardware at Windows Central, covering everything related to PC components and NAS. He's been involved in technology for more than a decade and knows a thing or two about the magic inside a PC chassis. You can follow him on Twitter at @RichEdmonds .

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Microsoft-Nokia culture clash will be tough to overcome

Professor of Organisational Behaviour, Cass Business School, City, University of London

Disclosure statement

Andre Spicer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

City, University of London provides funding as a founding partner of The Conversation UK.

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Among Western nations it would be difficult to find two cultures as different as the US and Finland. Americans are stereotypically confident and outgoing; Finns considerably more reserved. This is even reflected in the economies of the two nations: the US is the home of free-market capitalism; Finland is the poster-child of European social democracy.

These are just stereotypes, of course, but they do give you a hint of some of the real challenges that Microsoft is likely to face as it seeks to integrate Nokia’s mobile phone division, which it has purchased for €5.4 billion .

The purchase was announced with great fanfare by both Microsoft and Nokia senior management. For Nokia, the deal is seen as a way to exit from the handset market. Although they once dominated this sector, they are now well behind market leaders Apple and Samsung. For Microsoft, the purchase is a way for them to add a mobile hardware component that will allow them to compete head to head with Apple and Google.

Although the rhetoric around the deal sounds good, the reality is likely to be much messier. The research suggests that most mergers and acquisitions tend to destroy rather than create value.

Indeed, the history of Microsoft during the past decade has served as a remarkable case study of this basic rule. When outgoing CEO, Steve Ballmer, took over in 2000 it was absolutely dominant in its field and its share price was at an all-time high. During Ballmer’s tenure we have seen a stream of acquisitions, uncertain innovation and a stagnation of its shareprice. A New Yorker journalist recently quipped that Ballmer had finally figured out a way to make some money – he quit .

Maybe the acquisition of Nokia should be seen not as a shrewd strategic move, but more like one of the last great acts of the Ballmer regime. Indeed, research suggests that CEOs tend to become addicted to mergers and acquisitions , despite their declining returns.

The hubris of CEOs plays a big role here. Feelings of greatness often lead then to paint a rosy future picture of takeovers. They are also likely to overlook the significant risks that come with any acquisitions. This is all depressing news for Microsoft shareholders – if the research in the area is anything to go by, they are unlikely to see any significant gains from the acquisition of Nokia. In fact, they are actually likely to lose out.

But shareholders are not the only ones who will lose out. The future is likely to be relatively grim for employees in the Nokia phones division. There have already been reports in the Finnish press that many are worried about losing their jobs . This comes on the heels of a stream of layoffs in recent years.

But even for those who hold on to their jobs, life under the Microsoft regime is likely to be difficult. Merging cultures following an acquisition often proves to be difficult, if not impossible. A common outcome is talent staff crucial to the success of the company leave. Those who are left behind are likely to be relatively cynical. This typically leads to companies losing their innovate edge – often precisely what they were purchased for in the first place. This bodes poorly for the Nokia handsets division. Following the Microsoft deal it is likely to become an innovation deadzone, staffed by embittered cynics.

Members of the broader public are the final losers from this deal. Despite all the talk of how competitive the mobile business is, it is actually a market dominated by a few players. The increasing integration of hardware and software has meant a small handful of companies like Apple, Google and now Microsoft are in all our pockets.

This presents big concerns about who owns, controls and watches over our personal data. After all, many of these players are not just funky tech companies, they are also consumer surveillance companies. The purchase of Nokia by Microsoft represents a further step towards the consolidation of this market. But it also may represent a further step towards the consolidation of a few companies’ control over our personal data.

If this deal is likely to create so many losers, why is it going ahead? Well, there are likely to be some big winners as well. For one, Nokia shareholders seem to have benefited significantly with a big jump in share price following the announcement. The senior executives who put the deal together are also likely to do well out of the deal. Research suggests that when CEOs go on buying sprees – even unsuccessful ones - they are likely to get a bump in their reward package as well as a nice ego boost.

A final winner hidden in the wings is the army of advisers and consultants and such like who will gain a significant chunk of the transaction costs involved in trying to knit these two businesses together – and cleaning up the mess afterwards.

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• Company Forensics

Why Microsoft acquired Nokia (and then sold it)

Nokia is a Finnish multinational corporation that goes all the way back to the nineteenth century and started with wood mills that produced mainly paper. Yes, the same Nokia that a hundred years later created cultural icons like the 1110 phone model a lot of you probably rocked at some point, back in the early 2000s. It became a mainstay in mobile phones for some years, and it was interesting enough for Microsoft, who bought Nokia. The story, however, is much more complicated than that.

Nokia was an icon in mobile phones

If you’re older than 20, you most definitely know Nokia for leading the telecommunications market back in the early years of cellular phones, producing some of the first commercially successful handsets that sold hundreds of millions of devices and lead the industry for more than ten years straight, paving the way for the rise of companies like BlackBerry or Motorola. 

But all that was only the beginning of the mobile phone era and a few years into the 21st century came smartphones. Surprisingly, after the first decade of this new millennium, Nokia found itself fighting to keep up with the web 2.0 environment, the deadly competition of the iPhone and the swift development of Android. 

Unbelievable as it seemed then, Nokia sales started plummeting after mainly going only up. So, after having been making business for a few years with them, in 2014 Microsoft stepped in and acquired all Nokia mobile phone operations for no less than €3.79B, plus another €1.65 billion to license its portfolio of patents. It was kind of a lifesaver for Nokia but it was also Microsoft’s big bet on entering the feature phone game, to deliver both software and hardware. 

The challenge was a huge puzzle for Microsoft and it needed to be figured out quickly, as the competition of iOS and Android became ruthless.

Yeah, the glory of Nokia and the roaring success from old times had just vanished and things continued going south to the point where Microsoft ended up re-selling Nokia’s phone operations to HMD, again a Finnish subsidiary of the giant Foxconn Technology Group, in 2016.

So, despite still being alive, Nokia as a phone brand is not even the shadow of what it once was and the kingdom they built when they put cell phones in everyone’s hands, is just gone for good. 

How Nokia started

Let’s get nostalgic now. Nokia was born in Finland, in 1865, so it has lived over the transition of two centuries. Yes, it was during the final years of the industrial revolution when Nokia was created by Frederik Idestam and Leo Mechelin, two owners of wood mills in the Finnish towns of Tampere first and later in Nokia, a town named after the Nokianvirta river. 

The two businessmen decided to partner up and created a shared good, named the Nokia Company. By the end of the nineteenth century, they decided to step into the electricity generation business but just then came the first World War. By the end of it in 1918, Nokia was struggling to survive. No surprise there... But then it formed a partnership with the Finnish Rubber Works and the Cable Factory, all companies based in these Finnish lands.

Later in 1967, the three companies merged into what we know as the Nokia Corporation, after having been manufacturing electronics from cables to radio communicators, computers, and many other products like rubber boots or respirators. It was in the early 70s that they started getting into the network and telephone industry. 

The spirit of merging was in Nokia’s DNA and in the following years they acquired a series of companies, including several of the main television manufacturers from Finland, Sweden, and Germany, turning into the third-largest TV maker company. Similar story with radio communicators, that they even manufactured for the army along with other products.

These acquisitions and mergers were considered a significant shift in Nokia’s business and were mostly orchestrated by Kari Kairamo, the Finnish CEO that arrived in 1977 and that sadly committed suicide ten years later, by the time the company’s revenue base was hitting 3B. Under his administration, Kairamo executed several acquisitions that increased the company’s portfolio in the modern market. One of the companies they acquired was Mobira, an early cellular phone manufacturer that ended up being the foundation of Nokia’s future business in telephony. 

In 1981, Mobira launched the Nordic Mobile Telephone or NMT, as a solution to the increasing demand and saturation of the old manual phone networks, and it was the first one to allow international roaming. The network was opened in 1981 in Sweden and Norway, and soon in more countries like Denmark, Finland, and Iceland.  

But it was the Mobira Cityman 900 that really started Nokia’s race for fully mobile phones, being way smaller and lighter than the Senator, although it had a very high price tag at the beginning. Nokia had been winning from Finland’s open trade with Russia, and the Cityman 900 phone model became iconic after the Soviet Union president Mikhail Gorbachev used it to make a call from Helsinki to Moscow during a press conference in October 1987. Yes, with the Cold War at its peak, Nokia is reported to have managed successful business with both Russians and Americans. That’s how big it was. 

Nokia created a wide catalog of devices

Let’s keep the nostalgic vibe and remember some of the most popular Nokia phones that have a rightful place in the history books and in the memory of those in their mid-late twenties or more. But before that, we need to say that the amount of phone models in Nokia’s catalog over the years is ridiculous and there are many series and models that were successful. 

Sure, most of them are discontinued today, but still going through the full list can be stunning. Let’s remember some of the most iconic ones.

They also experimented with all-in-one type models that may have very well been the first approach to smart devices. The Nokia 900 Communicator from 1996 was a mini-laptop looking device that could do fax, email, spreadsheets and some other stuff. It wasn’t necessarily a commercial success, but it’s worth mentioning as one of their first attempts to have phones do more than calls and messaging. 

That first Communicator seems to have been the one that brought Microsoft’s attention in. Nokia executives at that time tell that a Microsoft recon team brought Bill Gates himself to see the device and have a demo of it, in a big tech conference in Las Vegas. Microsoft reportedly bought a good amount of them and this started a business relationship that would end up being critical.

Later in 1998, came yet another commercial hit and the first to successfully introduce the idea of gaming on a phone. Yes, the first one to feature the Snake game in it: the Nokia 6100. It’s very likely that you or someone you know had one of these in the early 2000s. In a way, Nokia can be remembered as the phone of the people, as they always delivered great durability and value for accessible bucks; whereas brands like Blackberry pursued a more sophisticated, executive audience. 

Nokia entered the 21st century still as the undisputed king of cell phones, having surpassed the 100th million manufactured phones in 1998. In that year alone, they had a sales revenue of $20 billion making $2.6 billion profit. By 2000 it employed over 55,000 people around 140 countries and had a market share of 30% in the mobile phone market, almost twice as large as its nearest competitor, Motorola. 

Before Microsoft acquired Nokia, the giant was already struggling

But just then, the first decade of the new millennium brought a real game-changer: in 2007, the iPhone was released to the world, quickly setting a new industry standard. Just switching from keyboards to an all-touchscreen the way Apple did it back then, was revolutionary, and with the implementation of iPhone OS, there was no doubt that Apple had defined a new era. 

The iPhone almost instantly dethroned Nokia and any other runner-ups. The director of user experience management at Nokia during that time has reported himself to have been explicitly tasked with creating an “iPhone killer” for the next year. Yeah, imagine being charged with that… So, shipments of iPhones were received and analyzed in Nokia’s headquarters, but something was just off now. The iPhone may have been the drop that spilled the glass.

Several former Nokia executives have shared their thoughts on the overwhelming transformation that the company went through with the overflowing success of their phones. Cause let’s remember the Nokia foundations from those wood mills and rubber factories and how its culture pretty much came from those humble days. Former employees have testified how all the crazy success and the tons of money that came through the years impacted on Nokia’s cultural foundations and principles. 

There are many testimonials of this and even one curious story to illustrate it, told by the former head of development and senior vice president from the 90s themselves. Yeah, whenever they had a problem or needed to solve a complex issue, management would climb up the top of their building to meet, just not in your regular meeting room but in saunas, surrounded by a spectacular rooftop view that helped ideas flow, according to them. It sounds extravagant, but if you think about it, it’s a very personal approach to problem-solving, maybe a little too personal, but ultimately an expression of trust.

With the outrageous growth came a new lineage of executives and managers that didn’t have time for any of that, as the company seemed to have become a monster hungry for more success and more money at all costs. The internal competition within the teams and divisions became ferocious and different management styles were confronted in what former employees have called a madhouse. 

Also, the killer competition didn’t stop with the iPhone. In 2008, the Google recently acquired Android mobile OS, was featured for the first time commercially in the HTC Dream phone.  

We all pretty much know how the story went from there: Android became the main mobile operating system on virtually every phone that is not an iPhone. Big manufacturers like Samsung or even Huawei raised through Android and claimed their rightful place in the Market too. 

Who Bought Nokia?

Cut to - the end of 2013, Microsoft announces the acquisition of all Nokia phone operations for more than 5B euros. It was Microsoft’s move to take part in the mobile market after having underestimated it and focused mainly only on its PC business. It was an ambitious bet and a bigger challenge for Microsoft. 

The dimension and complexity of the acquisition were such, that the deal was several months overdue after its announcement, due to legal and administrative challenges that involved manufacturing facilities in Asia, along with a mix of licenses and operating systems. By the time the deal was closed, some financials had of course changed and Nokia ended up receiving something around the 7B euros.

Nokia also had to remain in charge of operations in Korea and India, due to tax-related legal constraints, but they would manufacture for Microsoft and all phones would now be Microsoft branded. 

It was just the beginning of the massive puzzle that Microsoft had got itself into. For a reference, by 2013, Nokia sold nearly 251 million handsets, a mixture of feature phones and smartphones.

The Lumia lineup of Windows Phones only accounted for 30 million and Microsoft had to plan how to handle the other 220 million other devices that Nokia produced not on Windows Phone. It was a big worldwide business in which Nokia was in second place behind Samsung, as the top mobile phone manufacturers. Microsoft was now the world's second-largest phone manufacturer by sales.

With the hardware muscle now, some argue that Microsoft’s right move should have been to make the Windows OS free in all their smartphones. Of course, that’s easier said than done and ultimately, Microsoft wasn’t successful in figuring out the licensing puzzle or inserting itself as a phone brand. But just thinking about it, free adoption of Windows Phone would’ve definitely placed more direct competition on Android. It would’ve given them the chance to control their own app store, push its own cloud-based services, and many other possibilities. 

But instead, the firm’s efforts to elbow into first-party hardware received a massive setback. Long story short, in 2015 Microsoft writes off $7.6 billion as a consequence of the Nokia acquisition and lays off 7,800 employees and a roughly $800 million restructuring charge, writing down the vast majority of the phone business purchase price.

In 2016, Microsoft Mobile announced the sale of its feature phone business to the Finnish HMD Global and FIH Mobile. The sale included design rights and its rights to use the Nokia brand on all types of mobile phones and tablets worldwide until 2024. The total sale to both HMD Global and FIH Mobile amounted to US$350 million.

After Microsoft acquired Nokia, what happened to it? 

In this new stage, back again in Finnish hands, Nokia seems to have been recovering some of its roots and it now produces straight forward devices for the mid-lower end of the market. However, it’s been diminished to almost being unknown for the new generations. 

So, that’s how a company that once was reigned over the mobile phone industry became a runner-up and ended up maneuvering just to keep its head up. Now, if we learned something today, is that when a company reaches the global magnitude that Nokia reached, it’s virtually impossible for it to go down to the point of disappearing. Just think of something equivalent nowadays, like Samsung or Apple going out of business… it’s just hard to imagine, it would probably require a global calamity. 

But remember, we also learned that success can sometimes hit hard and shake a company’s foundations just as much as a failure. Having a solid base and principles to stick to can end up being critical for a company’s endurance over time, regardless of its size.

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Team-Building Strategies: Building a Winning Team for Your Organization

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For Business Negotiators, Patience Can be a Virtue

The story of microsoft’s nokia acquisition makes a case for business negotiators staying at the table.

By PON Staff — on October 24th, 2023 / BATNA

Business negotiators know that persistence and tenacity can make all the difference between impasse and a game-changing breakthrough. Take the saga behind Microsoft’s 2013 announcement of its pending $7.2 billion acquisition of Finnish mobile phone company Nokia’s handset and services business. The two parties engaged in many months of fruitless talks before either side believed that an agreement was likely—yet a late-stage brainstorming session brought them together. We analyze the negotiations with an eye toward identifying why things suddenly went right after so much had gone wrong.

Nokia builds its BATNA

Microsoft and Nokia had been partners since 2011, when the Finnish firm began installing Microsoft’s Windows Phone operating system (OS) on its smartphones. But the arrangement had been disappointing. Nokia was lagging far behind smartphone manufacturers Samsung and Apple in terms of innovation and market share, and the Windows Phone OS, used primarily on Nokia handsets, was failing to meet expectations as well.

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In January 2013, Microsoft CEO Steven Ballmer made a quick phone call to Risto Siilasmaa, the chairman of Nokia’s board of directors, to raise the possibility of Microsoft buying divisions of Nokia. The following month, the two men sat down at a wireless-industry conference in Barcelona, Spain, to discuss the idea further. The two leaders agreed that inefficiencies existed in their current agreement, including duplicate engineering, marketing, and advertising efforts. Then they brainstormed solutions ranging from minor tweaks to their current deal to more extensive collaborations and business mergers, reports Ina Fried on the technology news website AllThingsD.com.

Nokia narrowed in on two possible options. First, it could sell its underperforming handset business to Microsoft or another company and focus on its telecommunications equipment, mapping, and patent businesses. Second, it could let its deal with Microsoft lapse at the end of 2014 and try to revive its handset business by adapting its smartphones to Google’s Android system. In fact, Nokia informed Microsoft that one of its teams already had Android up and running on Nokia’s Lumia handsets. By cultivating this strong BATNA , or best alternative to a negotiated agreement , Nokia gained the power to walk away from a subpar offer from Microsoft.

Early stumbles between business negotiators

In fact, Nokia executives did just that—turned down a disappointing proposal—immediately after listening to Microsoft’s first formal pitch for an acquisition at an April 2013 meeting in New York. Siilasmaa and his team informed Ballmer and his team that they were too far apart on price and other key issues, such as which company would own Here, Nokia’s mapping service. The Nokia executives believed strongly that they needed to hold on to Here and their ability to sell the software to other companies. Meanwhile, Microsoft felt it couldn’t keep pace with competitors without controlling the mapping technology it was using in its phones, tablets, and PCs and on the web, according to AllThingsD.com.

The next month, a meeting between the two teams in the London office of Microsoft’s law firm also flopped, and not just because Ballmer tripped over a glass coffee table and cut his forehead in the middle of it. (The injury turned out to be minor.) A follow-up meeting at a Nokia-owned mansion in Finland the following month was aborted after four hours because of lack of progress, according to the New York Times .

A deal takes shape

A breakthrough came when Nokia informed Microsoft that it would proceed with formal talks only if Microsoft agreed to abide by certain preconditions, most notably a commitment to set up a financing source for Nokia and the caveat that Here was off the table.

Microsoft agreed. The parties met in early July 2013 in New York, where in the course of discussion they happened upon a solution to the question of who would control the mapping service. Why not share the code, with Nokia retaining intellectual-property rights to Here? Nokia realized that it could grant Microsoft a license to access and customize Here’s source code and own any improvements it made. Nokia would retain ownership of Here and the power to license the service to other companies.

At the end of a weekend of talks, Ballmer and Siilasmaa shook hands on the rough outlines of an agreement, which was filled out over the next two months. As part of the deal, 32,000 Nokia employees, including CEO Stephen Elop, would be hired by Microsoft. A former Microsoft executive, Elop was considered a likely successor to Ballmer, who announced plans to retire within a year.

Lessons learned

The Microsoft-Nokia deal offers several useful takeaways for business negotiators:

■ Don’t jump the gun on price. In its initial presentation, Microsoft lost Nokia’s interest by making a price offer that the Finnish firm considered far too low. Microsoft may have erred by raising the issue of price before it understood key aspects of Nokia’s business and its interests in a potential sale. For this reason and others, it often makes sense to hold off on making concrete price offers until later in a negotiation, after you have engaged in thorough fact-finding. ■ Be open about your BATNA. Nokia not only cultivated a strong alternative to a deal with Microsoft—the capability to jump ship from Windows Phone to Android technology—but also shared this confidential development with Microsoft. A strong BATNA brings with it negotiating power, especially when the other side knows that you could easily walk away. ■ Keep talking. The parties could have gone their separate ways after their first meeting. Instead, each assigned teams to explore issues and tradeoffs they may have overlooked or undervalued. The two sides continued to meet despite a series of deadlocked talks—and eventually reached a point where they could brainstorm creative deal terms .

Setting negotiating conditions: A risky move

Interestingly, it was only after Nokia laid out conditions to future discussions with Microsoft—financing commitments and taking Nokia’s mapping service off the table—that the negotiating teams were able to reach agreement.

Insisting that the other party agree to certain terms as a precondition to negotiation is a common but risky tactic. For example, in the Minnesota Orchestra’s l abor dispute, for example, the players said for many months that they would negotiate with management only after the lockout ended. But management was loath to accept this condition, aware that the players would have little motivation to accept significant salary cuts if they were performing and being paid.

As the failure of this condition illustrates, setting conditions to negotiation is a potentially self-defeating strategy. Remember that your counterpart will weigh the costs and benefits of accepting your conditions against his alternatives away from the table. If you have a strong BATNA, as Nokia appears to have had, then it may make sense to take this risk. But note that even in this case, Microsoft was able to make inroads on the mapping service issue that Nokia had claimed was nonnegotiable. Microsoft may have saved the deal by refusing to assume that Nokia’s conditions to negotiation were nonnegotiable.

In general, the wisest course for business negotiators may be to agree to negotiate rather than stipulating potentially deal-breaking conditions. Then, at the table, seek tradeoffs that will help you gain leverage on the issues you value most, while demonstrating flexibility on your counterpart’s pressing concerns.

What is some advice you’d offer to other business negotiators?

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CASE STUDY: ACQUISITION OF NOKIA’S DEVICES BUSINESS BY MICROSOFT CORPORATION

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Supriya Mahajan

In present era advertisement has a great impact on the consumer’s behavior especially on children but when it became unethical it will lead the society in the wrong direction. The food product companies are now spending a great amount on advertisement to attract this segment. Fast food advertising has become a major concern in food product advertising. Good nutritional diet during childhood is essential for physical and mental growth. The Indian food consumption trend shows a shift over the last one decade. Now day’s children prefer junk food like Pizza, Burger, soft drinks instead of healthy food to eat which will affect their health. These junk food increases the weight of children and increase of weight may arises some other health related issues. The objective of the study is to understand the effect of advertisement on children, To understand the parental view point towards the unethical practices carried on by the food advertisers. This study also helps to find out parents preferences of food items for their children.

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Thomas Kolawole Ojo

SERVQUAL method comprising five dimensions was used to assess passengers’ perspective of ICB transport service quality on Cape Coast- Accra route. A questionnaire involving a 26-item attributes was used to measure the expectations and perceptions of service quality on a five-point likert scale from strongly disagree to strongly disagree. The 162 copies of self administered questionnaires were served on passengers aboard by a mixture of purposive and systematic sampling to ascertain how socio economic characteristics influence perception of service quality and the differences between expectations and perceptions of the five dimensions. An independent sample t-test and ANOVA results showed that tangibility, empathy, assurances and responsiveness each had positive impacts on passengers’ perceptions of service quality. There emerged a significant difference in passengers’ perceptions of the dimensions of assurance, tangibility and responsiveness across sex of passengers; ages and level of education and income across reliability, assurance, tangibility and responsiveness.

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Luxury branding and marketing is a new ball-game altogether, both from the perspective of the marketer as well as the consumer. Luxury brands have always been seen as a fascinating space and luxury brand marketing as one of the most complicated areas to develop strategies and marketing mix. Consumer‟s perception of value is changing and their concept of luxury is metamorphosing. It therefore becomes imperative to view it form both angles that is in relation to and isolation from the „regular‟ goods and their marketing strategies. Over time LUXURY meant different things to people in different cultures. It is a conceptual and symbolic dimension mainly irrational and engages strong and intense multi-sensory emotions of consumers. It is also a culture and a philosophy and therefore requires deep understanding of the brand and its profile, before the adoption of business practices because its particulars and marketing mix strategies are fundamentally different from other types (regular) of goods and services. As quoted by Philip Kotler “Luxury is above all a world of brands”. The luxury brands go beyond the object, they are built from the reputation of its creations. It is crucial to listen to the client although consumer‟s attitudes and behaviors towards luxury are ambivalent and for them the most important characteristics are: quality of goods, self indulgence, and ancestral heritage. This paper identifies several key factors for luxury brand success by analyzing its marketing mix and how luxury goods are different from regular goods and then go on to explore some facets and trends of the luxury goods as well as their market and consumers, impact of internet technologies, and Intellectual Property violations. Considering that the luxury concept has shifted to the „new‟ meaning, we look into that aspect to understand the key drivers for luxury brands in today‟s context, as well as in the future.

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