MICROSOFT ACQUIRED NOKIA IN UNIPOLAR OPERATING SYSTEM MARKET
Netra Pal Singh
Management Development Institute, India
E-mail: knpsingh@mdi.ac.in
Submission: 13/11/2013
Revision: 05/01/2014
Accept: 10/01/2014
ABSTRACT
The recent big tickets include Microsoft acquiring part of Nokia for US$
7.2 billion, Verizon buy 45% stake in Vodafone for US$130 billion, Google
acquiring Motorola for 12.5 billion. These buyouts are analyzed and commented
by experts of the industry. This research paper attempted to collate their view
in the context of Microsoft and Nokia deal on six parameters. These parameters
are (i) reasons for the downfall of the Nokia market share, (ii) general
comments of the experts, (iii) similarities / dissimilarities of past and
business models of the smartphone business, (iv) reasons for Microsoft to buy
out Nokia, (vi) impact of buyout on Microsoft, Nokia, consumers and markets. In
addition, paper discusses the existing theories of merger & acquisition in
telecom sector in the past.
1.
INTRODUCTION
According
to Redmond (2013), 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. Microsoft CEO Steven Ballmer told reporters at
Nokia's headquarters in Finland, “It's a signature event”.
Walton
(2013) and other experts commented on Microsoft-CEO statement in the context of
buying Nokia. They said his justification is based on four factors. These are
(i) acceleration of phone share; CEO Microsoft quoted the success of Lumia in
the context, (ii) strengthens overall opportunity; CEO Microsoft mentioned that
Windows Phone will improve the health of the entire Windows ecosystem.
Microsoft believes that the traditional role of Windows in enterprise software
will help elevate Windows Phone into the workplace as well as in the home
segment what it called the “consumerization of IT”. Microsoft believed that
increased smartphone sales will lead to increased tablet sales and increased
tablet sales will lead to increased PC sales. It will help Microsoft to
recreate every Google and Apple service for Windows Phone, (iii) smart acquisition;
CEO Microsoft mentioned that the purchase used offshore cash so as not to have
any impact on investors. Nokia purchase will help company’s Windows Phone
business to achieve breakeven of 50 million devices faster, (iv) strong
execution plan; he mentioned that Nokia will continue operating as it is with
minimal interference coming from the merger. The Nokia executive team will join
Microsoft, but actual phone development will continue unabated in Finland.
Further
to it, Microsoft believes that there is an urgent need of having a mobile
handset device business, if Microsoft wishes to compete with Google and Apple.
However, the experts and the market have different views on the buyout. Sizable
segment of the market does not report it a best buyout for Microsoft.
In
any case, the success and failure of the Microsoft and Nokia deal will have
huge impact on the phone business across the globe. Keeping in view the
importance of such deal in mobile phone market, this research is attempted with
two objectives.
Objective 1: To
present an analysis of the very recent views expressed by experts and members
of eco-systems of mobile communication industry. These views are mainly with
respect to impact on eco-systems of mobile industry, acquirer Microsoft and
bought out company Nokia.
Objective 2: To established similarities with earlier
theories/findings of merger and acquisition of telecom sector such as synergy
trap hypothesis (MYEONG-CHEOL, et al. 2002), asset efficiency hypotheses (SALLEH,
et al. 2013; BARKEMA; SCHIJVEN, 2008), hypothesis with respect to innovative
performance of the acquiring firm and similarities in knowledge base of
acquired firm (CLOODT, et al. 2006), and ethical conduct of mergers and
acquisition have relations with job performance (LIN; WEI, 2006).
2.
METHODOLOGY
The
methodology adopted in this research work is exploratory cum descriptive in
nature. The methodology of the study is designed keeping in view above two
objectives of the study. Most of the data used in the study is secondary data
collected from the articles, news reports, press releases published on the web
before and after the buyout of Nokia phone business by Microsoft. These sources
are very recent. The analysis is similar to content analysis. Key words and
phrases were identified from the secondary sources with respect to (i) reasons
for downfall of Nokia, (ii) general views on the deal in the market, (iii)
similarities & dissimilarities of the past & business models in
relation to merger & acquisition activities of competitors in the market,
(iv) specific reasons for Microsoft to buy Nokia, (v) impact on the
stakeholders.
In
addition, analysis of the Microsoft-Nokia deal is done with the following
earlier theories/ researches of the past with respect to telecom company’s
merger and acquisition.
(i)
Synergy Trap Hypothesis: It
says that immediately before and
after an acquisition announcement, the acquiring firm’s stock price is
negatively affected and the target firm’s stock price is positively affected.
(MYEONG-CHEOL, et al. 2002).
(ii)
Technical
Efficiency: Merger & Acquisition (M&A) activities
are one of the routes to enhance relative technical efficiency in an effort to
increase the overall efficiency which would later be translated into increase
revenue. (SALLEH, et al. 2013); BARKEMA; SCHIJVEN, 2008).
(iii)
Innovative
performance: Non-technological M&As appear to
have a negative impact on the acquiring firm’s post-M&A innovative
performance. With respect to technological M&As, a large relative size of
the acquired knowledge base reduces the innovative performance of the acquiring
firm (CLOODT et al. 2006).
(iv)
Ethical
conduct: Ethical conduct in M&A is significantly
correlated with employee job performance (LIN; WEI, 2006).
It is
difficult to prove all such theories at this stage since empirical evidences
for some hypotheses are not yet available at present. But it was possible to
have data collected with respect to
first and fourth hypotheses from the sources as listed above.
The
data with respect to recent statistics of top smartphone operating systems
(OS), shipments, and market share from 2008 to 2013, world wide mobile terminal
sales to end users from 2009 to 2013, smart phone OS Shares in select countries
for July 2012 & 2013 with a view to see the dominance of operating system
providers and handset manufacturers.
In
addition, data with respect to market share forecast of Operating System in
India for 2017, and market share of feature phones and smart phones in India
for the year 2Q 2011, 2Q 2012, 2Q 2013 was also collected to have an idea how
the dynamics of a big market is behaving. The data is given in Table A1 to
Table A6.
3.
REASONS OF DOWNFALL OF NOKIA
This section present reasons for the downfall of the Nokia. Analysis is based on mainly expert opinion of Murtazin (2010), Thompson (2013), Gassée (2012), Ciol (2012), Chang (2012), AhonenDominies Communicate (2013).
(i)
Operating System & Apps: During August, Thompson (2013)
wrote that both BlackBerry and Nokia had significant strengths in this stack:
“BlackBerry had differentiated hardware –
there are people who still swear by their keyboards – and highly
differentiated services, including BlackBerry Enterprise Server and BlackBerry
Messenger”
“Nokia
dominated all the parts of this stack you don’t see: they had, and in some
respect, still have, the best supply chain and distribution network. In
addition, they had high quality hardware that served every segment imaginable”
However, these strengths were
missing in operating system & apps for success and compete. Ciol (2013)
reported that operating system space was nearly occupied by
Android and iOS and Window operating system does not have much role.
(ii)
Domination
Blindness: Gassée (2012)
mentioned that with its Microsoft Exchange integration; a
solid personal information manager that neatly combines mail, calendar, and
contacts; and the secure BlackBerry Messenger network, the
"CrackBerry" is rightly perceived as the best smartphone on the
market. The success blinded the management and it refuses to accept that the
iPhone poses a threat to their dominance.
Apple and Google deploy technically superior software platforms that
expose the BlackBerry's weaker underpinnings. In 2010, RIM acquires the QNX
operating system in an effort to rebuild its software foundations, but it's too
late.
Story is the same for Nokia. In 2007 Nokia was the world's largest
mobile phone maker, but Nokia could not see the technical shortcomings of aging
Symbian, or the utility of their attempts to "mobilize" Linux. It
allows iOS and Android devices quickly eat into Nokia's market share and market
cap.
Leadership: Ahonen
(iv)
Delay in giving up Symbian: Nokia was slow to react
on the aging features of Symbian which were not in line of consumer demands (CHANG,
2012; CIOL, 2012). Microsoft is still shipping the 2nd
version of its Windows Phone OS, whereas Android and Apple are in their 10th
version (Jelly Bean) and 7th version (iOS7) of Operating
Systems (PATHAK, 2013).
(v)
Politics
of Middle Management: Middle management of any organization plays
a crucial role in sustaining the growth in all segments. However, Nokia middle
management was highly publicized. It was focusing more on internal competition
and their personal interest. The phenomenon of co-operation was missing at
middle level (DOMINIES COMMUNICATE, 2013).
(vi)
Stiff
Project Management: Exceedingly
stiff project management model and management was another reason for lack of
innovation and in turn downfall. Project management model was tuned to manufacturing
process efficiency not for innovation. For the workforce it was difficult to
innovate against the manufacturing process efficiency (DOMINIES
COMMUNICATE, 2013).
(vii)
Nokia failed in the
race with Samsung: Nokia could not market
itself as innovator in the market (CHANG, 2012; CIOL, 2012). The price of Nokia
phones has been higher than Samsung phones. In addition, Samsung has the
capacity to launch new models in every 40 days while Nokia has very limited
capacity of introducing new models (FUNDEY.COM, 2012).
(viii)
Hurt on the lower end
and also by local vendors: Nokia did not
anticipated competition in the lower end of the
market. Its competitors such as HTC,
Huawei and ZTE, competed better in low-end emerging markets like China (CHANG,
2102). Similarly, in dual SIM emerging market of India where in Nokia could not
compete with local vendors such Micromax, Haier, Spice
Mobiles, Maxx Mobiles etc; due to its arrogance (LOBO, 2011). The story was a
repeat of dual SIM card phones in other countries such as Russia. Nokia was
slow to react (MURTAZIN, 2011).
(ix)
Android paid off (for Samsung) and Windows Phone Hasn’t … Yet (for
Nokia): Samsung bet on multiple platforms (Android,
Windows Phone, and homegrown OS, Bada).
Android paid off handsomely. Samsung chose Android at the right time.
Nokia, spent time on Symbian. Its partnership with Microsoft was too late from
business perspective (CHANG, 2012).
(x)
Strategic Move in relation to MeeGo, Qt-A, Meltemi: Rox (2012) analyzed the strategies of the Nokia before February,
2011 and after arrival of Elop & concluded that “bad luck + bad execution
of plans and mistakes of Elop (CEO Nokia) lead to the massive downfall. Utkarsh
(2013) cited MeeGo as NoGo, a reason for the downfall of Nokia. He also cited
that Ovi store never really took off.
Linux based Melteni platform melted due to layoff of employees by
Nokia. However, it continued to make investment in Qt-A.
4.
GENERAL COMMENTS / VIEWS/ STATEMENTS
OF THE EXPERTS / RESEARCHERS
In
the past experts, executives, researchers have expressed their views about the
deal. They have described it as terrible idea to an excellent one in the
context of economic environment across the globe. These views are listed in the following:
(i)
Data given in table 1 is an ample proof that this deal is not very
costly in comparison to earlier ones. Nokia bought NAVTEQ
for 8.1 billion, which is the forefather of today’s HERE Maps. It is included
in Microsoft Nokia deal for 7.2 billion. It is therefore cheap acquisition.
(ii)
Microsoft/Nokia deal is a terrible idea in the present context (MIMS,
2013).
(iii)
There is very little in this acquisition for the Microsoft.
Microsoft’s, previous partnership with Nokia had yielded every bit of this deal
as mentioned by Mobile Analyst Ben Thompson (MIMS, 2013).
(iv)
It is an act of “quiet desperation” that is unlikely to succeed
(Om Malik of GigaOm (MIMS, 2013)).
(v)
It will drive
volumes of business for Microsoft in mobile phone business domain CEO Microsoft
(MIMS, 2013).
(vi)
It will triple Window
Phone Market Share by 2018 in many markets across the globe (BLAGDON, 2013).
(vii)
The layoff factor
will be nil to nonexistent, as per Colliers International Senior Vice President
Jim Beeger (DONATO-WEINSTEIN, 2013). It is contrary to Google-Motorola deal wherein
layoff of 20% employees was announced as first step by Google after inking the
deal (MILLER, 2012). The process of layoff by Google is continued during 2013 (ROWINSKI,
2013).
(viii)
The deal that make no sense (THOMPSON,
2013).
(ix)
Nokia buy makes it
easier to envision cleaving Microsoft along devices and services lines of its
business (FOLEY, 2013).
(x)
Nokia threat: Microsoft had to
buy Nokia because Nokia was going to stop making Windows Phones very soon and
planning to switch to Android (Views of the experts (GRALLA, 2013).
(xi)
It is a clear sign that
Microsoft believes it can and must succeed in the phone business. It cannot
afford to leave the success in the hands of a partner like Nokia. Microsoft’s
phone software has managed to pass BlackBerry, but remains a distant No. 3
platform to Google’s Android and Apple’s iOS (FRIED, 2013).
(xii)
“It is combination of two weak companies. It
will emerge as a strong new competitor in the phone domain is doubtful” said
Paul Budde, a telecommunications consultant in Sydney. Further comments: “Both
Nokia and Microsoft really missed the boat in terms of smartphones, and it is
extremely difficult to claw your way back from that.” (BASS; HEISKANEN;
FICKLING, 2013).
(xiii)
Metz (2013) reported that it
will be a best shot to Microsoft in a world that’s quickly moving from desktops
and laptops (Microsoft’s traditional domain) onto smartphones and tablets. Rise
of Google’s Android mobile operating system and the Apple iPhone, forced
Microsoft to change its ways.
(xiv)
Metz (2013) mentioned that
Google bought Motorola, to better compete with Apple. Microsoft has bought
Nokia to compete with both of them (Google & Apple). He also said that
Microsoft is in habit of following Google & Apple.
(xv)
Three lessons for Nokia (a)
Nokia should have not rested on its laurels, (b) Nokia should have challenged
itself, and (iii) Nokia should have been surrounded by Web companies or
consumer-electronics manufacturers to succeed (LYNN, 2010). These lessons are
true for today’s winners also.
(xvi)
On the capabilities of Window
phone, a Senior Manager, Nokia Multimedia in T&T forum said that “You can’t make a Ferrari sports model on
top of Lada engine” (DOMINIES
COMMUNICATE, 2013).
(xvii)
Nokia has strong carrier
relationship with African telecom operators. It has brand equity, and excellent
supply chain. It has a good position in Africa's dumb and feature phone
segments. Microsoft will make advantages of it in future (HARRIS, 2013).
(xviii)
Garnry (2013) mentioned that
“The job is not done for Nokia. In fact the struggle might continue, but today
Nokia is the winner. Microsoft is no longer one obvious buyer of BlackBerry’s
mobile division” now.
(xix)
Marek (2013) mentioned that
“if history is any indication, it's clear that even when the strongest
companies acquire weaker ones, it doesn't spell instantaneous success”.
Table 1: Past Acquisition in $ Billion in the
Domain
|
SN |
Deal |
Year |
Amount |
|
1 |
Google buys
Motorola Mobility |
2011 |
12.5 Billion |
|
2 |
Microsoft
buys Skype |
2011 |
8.5 Billion |
|
3 |
Nokia buys
NAVTEQ |
2007 |
8.1 Billion |
|
4 |
Microsoft-Nokia
deal |
2013 |
7.2 Billion |
|
5 |
Nokia buys out Siemens out of NSN |
2013 |
2.2 Billion |
|
6 |
Sony buys out
Ericsson |
2012 |
1.5 Billion |
|
7 |
NSN buys Motorola audio assets |
2011 |
1.2 Billion |
|
8 |
Microsoft
buys Yammer |
2012 |
1.2 Billion |
|
9 |
Face book
buys Instagram |
2012 |
1.0 Billion |
|
10 |
Nokia sells Vertu |
2012 |
0.26 Billion |
Source: Peter (2013), Hill
(2012)
5.
SIMILARITIES & DISSIMILARITIES
OF THE PAST & BUSINESS MODELS
Zeigler
C. (2011) reported that Google dropped its "top five" Android
partners to let them know that this Motorola acquisition was taking place.
Microsoft has not done yet after making the announcement of acquiring Nokia.
However, it is reported by the experts that it may be end to Window Phone
Licenses (ROGOWSKY, 2013).
Google's
primary goal was to shore up Android's shaky patent situation. Though it was
not the exact case for Microsoft but Nokia buy out had increased the size of
the basket of its patents.
The
smart device market has two basic business models as
followed by Apple & Google. Additional models are also visible in the
market & can be termed as Samsung Model or future Microsoft-Nokia Model. These
models are listed as under:
(i)
Apple
Model: Apple has focused on a closed vertical
integration model where the device value is high and is based on a combination
of software and hardware, and the cost model reflects that value. In addition,
the closed nature of the ecosystem extends the control and the overall price
(and underlying costs).
Baker
(2013) mentioned that Apple has approached the market from the customer end,
choosing to own the OS, most of the service infrastructure, the distribution as
a way to keep as much revenue within their ecosystem and deliver profits. It is
further moving back into the supply chain, developing its own processors for
example.
(ii)
Google
Model: Google model has as many devices as possible
allow users to consume Google cloud services. It has opened up OS Android to a
large set of device vendors, driving a market where the software has little to
no cost and reflects lower product costs and prices. Though recently, it had
acquired Motorola to have some intent of Apple Model.
(iii)
Samsung
Model: Baker (2013)
said that Samsung is primarily
supply chain-based business model. It is controlling much of the production of
the components and it can better manage cost and supply. In addition, it rely
on others partners to provide the front-end customer services such as support
of distribution, software, Operating System, and services. Further, it is
venturing in to these domains by having its own OS & other tools but these
tools are not yet very popular.
(iv)
Microsoft
Model: Microsoft business model will be somewhat
similar to Apple and Samsung. Microsoft
has an OS basket, and other tools such as Skype & Lync that depend on open integration of
smart device which none of the competitors have in the
domain (EDHOLM, 2013). He added further, that Microsoft has been out-flanked
for two of the cloud pillars, search and social. In addition, Microsoft has a
reasonable position in the gaming pillar (Xbox Live) but it has minimal
positions in entertainment (Netflix, Amazon Prime, MSOs). It means, Microsoft's
strength is in communications and productivity apps (Office 365). Still it has
gaps. Nokia is the beginning of strategy which has filled the gap in the
hardware segment. It also needs the client business the way Samsung and Apple
do. In Microsoft environment its client partners are suffering. Even Nokia
is an example. Window OS has failed to bailout it. After filling the gaps
Microsoft may emerge with a better business model.
6.
REASONS FOR MICROSOFT TO BUYOUT
NOKIA
The
community of the experts came out with many reasons that are responsible for
the deals between Microsoft and Nokia. These reasons are listed in the
following.
(i)
To compete better with Android
and iOS & also to take full control of its smartphone destiny (CRINGELY, 2013;
ROGOWSKY, 2013).
(ii)
To support Ballmer’s (CEO
Microsoft) new devices and services strategy for the Microsoft (CRINGELY, 2013).
(iii)
The deal will bring 32,000
Nokia employees on board of Microsoft. It will transform Microsoft into a true
multinational company with all the tax flexibility (CRINGELY, 2013).
(iv)
Acquisition of a global brand
and an effort to keep Nokia away from jumping into the Android camp (CRINGELY, 2013).
(v)
To create a setup which gives
Nokia full control over the Windows Phone platform, and Microsoft does not want
to lose its primacy over its mobile efforts (WILHELM, 2013).
(vi)
Apple and Google control
mobile software and hardware, which allows them to push their own services to
users. Microsoft can do the same by acquiring Nokia phone business (WILHELM, 2013).
(vii) It
is a mile stone in Microsoft’s efforts to break Apple and Google’s hold on
smartphone business (WILLIAMS, 2013).
(viii) The
deal will protect Windows Phone platform future and will make it may make it more
competitive & can give impetus to innovation (BARRETT, 2013; OVIDE, 2013).
(ix)
Microsoft currently makes less
than $10 from every Windows Phone unit sold; that number may go up when it's
all in-house (BARRETT, 2013).
(x)
Nokia's Lumia
smartphones are beautiful, well-designed, solid, and top build quality. Lumia
didn't sell well, but still more successful than Microsoft's Surface tablet.
Nokia Lumia will guarantee that Microsoft's push into smartphones is not an
embarrassment (BARRETT, 2013).
(xi)
The deal provided an
opportunity for better Utilization of cash Microsoft kept away from the US
taxman (TIMMONS, 2013).
(xii)
Finland
is planning to cut its corporate tax rate to 20% from 24.5% to attract new
business. It will be to the advantage of Microsoft (TIMMONS, 2013).
(xiii) Ballmer
Statement “Integration of two great teams 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”. It mean new
synergies will be created (METZ, 2013).
(xiv) Google
also bought an enormous collection of smartphone-related patents (more than
17000 patents at the total buy of $12.5 billion in Motorola deal in Motorola
deal). Microsoft does the same with Nokia deal by buying 8,500 design patents
of Nokia (METZ, 2013; MILLER, 2102).
(xv) It will help Microsoft to make more money per handset, less
redundant marketing efforts and access to the source code for Nokia's mapping
software. But if App Ecosystem is not improved by Microsoft it will be a naught
(JOHNSON, 2013).
(xvi) Microsoft was very keen to be in
the Windows Phone smartphone business & also wants to bring Stephen Elop
back to the company as CEO (WOLF, 2013).
(xvii)
It is possible that Nokia
threatened to switch to Android (the relevant contracts are getting close to
renewal), rather as Motorola threatened to sue other Android OEMs before Google
bought it (GRALLA, 2013).
(xviii) Issues
Related to Window Phone OS: Restrictions on Lumia 1020 camera software. A
Bluetooth file sharing feature is particularly popular in developing countries,
but Microsoft wasn’t aware as US consumers don’t typically use it. It can exploit
these features in developing countries (WORSTALL, 2013).
7.
IMPACT OF THE BUYOUT ON STAKEHOLDERS
OF ECOSYSTEM
As
reported by large number of experts of the industry, the deal will have a huge
impact on the ecosystem of the mobile phone industry across the globe. It may
put breaks on Android to convert present Unipolar OS market (as evident from
the data given in tables A1 to A6) in to Multi-polar OS Market. Additional impacts
of the deal are listed in the following.
(i)
Shares of Microsoft slid as
much as 6% in the afternoon of the deal date, reducing market value of
Microsoft by $15 billion, as investors protested the acquisition of an
underperforming and marginalized corporation that lost more than $4 billion in
2012 (REUTERS, 2013). It is in sync with synergy trap hypothesis in the context
of mergers and acquisitions (MYEONG-CHEOL, et al. 2002).
(ii)
It will brings an end to
Nokia’s three-decades-long adventure mobile phones selling, as well as
speculation about a future sale to Redmond, dating back to the moment Nokia
announced a former Microsoft executive, Stephen Elop, would take the reins in
September 2010 (OLSON, 2013).
(iii)
The deal will make Microsoft a
big time hardware player, and Nokia will shift focus to technologies and
software (RAJAN, 2013). Nokia will focus on its three established businesses,
i.e., (a) network infrastructure and services; (b) mapping and location
services; and (c) advanced technologies (RAJAN, 2013).
(iv)
It will position Microsoft as
number three provider in the smartphone domain (ROGOWSKY, 2013).
(v)
It will effectively end the
Windows Phone licensing business. It may not be true. Business model of
Microsoft may emerge more innovative (ROGOWSKY, 2013).
(vi)
It's a bold step into the
future - a win-win for employees, shareholders and consumers of both companies
(ASSOCIATED PRESS, 2013).
(vii) It
will expand the range of applications on Microsoft products. It may also force
the competitors as well as Microsoft to innovate more in all segments of the
mobile phone business.
(viii) Nokia
shares jumped as much as 48 percent in Helsinki as the deal with Microsoft
removes a money-losing handset business and lets Nokia focus on higher-margin
networking gear (BASS; HEISKANEN; FICKLING, 2013). It is again in sync with
synergy trap hypothesis in the context of mergers and acquisitions (MYEONG-CHEOL,
et al. 2002).
(ix)
Windows phone partners such as HTC, Samsung and Huawei will be loser (MIMS, 2013). It
is yet to be proved.
(x)
Asha
OS: Microsoft has bought Nokia’s line of Asha
quasi-smart phones. These devices are halfway in between
“dumb phones” and smartphones in features and processing power. Nokia has done
an impressive job of making them into an affordable alternatives to smartphones
for emerging markets. It may be end for Asha OS if it is replaced with Windows
(MIMS, 2013).
(xi)
Blackberry
can no longer count on a Microsoft
acquisition to save it (MIMS, 2013).
(xii)
Samsung
just recently pulled ahead of Nokia in India, and if Microsoft bungles the transition of India’s Asha fans
to Windows Phone, a transition that might not work even under the best
circumstances. It will be an advantage to Samsung (MIMS, 2013).
(xiii)
Huawei,
ZTE and Samsung are already leading the Android charge in emerging markets, but
right on their heels are the “no-name” manufacturers of Android phones,
which already produce 1 in 4 Android handsets. If Asha is out of the race in India, the local manufacturers
could make further inroads into a huge new market (MIMS, 2013).
(xiv) The
acquisition may solve Nokia's problem of cash (GRALLA, 2013).
(xv) It
had prevented the only Windows Phone original equipment manufacturer (OEM) from
vanishing from the market (GRALLA, 2013).
(xvi) Microsoft would obviously reduce or
remove the high charges for licensing its mobile operating system. Hence there
is a possibility of getting low-priced Lumia phones very soon (DATTA,
2013).
(xvii) OEMs may develop
their own ‘non-Google’ version of the Android OS, and may become independent of
existing OS developers (PATHAK, 2013).
(xviii) Both
Microsoft and BlackBerry will be competing for the third place in the war of operating
systems specifically in the enterprise space (PATHAK, 2013).
(xix) Nokia’s mobile telephony patents
(10,000 in number) may put a little more financial strain on Korean Handset
Manufacturers (Samsung, LG Electronics, and Pantech) (BUSINESS KOREA, 2013).
(xx) Nokia focus was on Asian Markets.
Microsoft will focus on USA & Europe Markets (SINGH, 2013). Microsoft may
also focus on Asian markets.
(xxi) It
may result in to breakup of Microsoft into at least two separate operating
businesses: one focused on consumers and one on enterprises (WOLF, 2013).
(xxii) Microsoft
will not lay off employees of Nokia. It will be ethical practice and may
enhance job satisfaction among employees. It is in line with the theories of Lin
and Wei (2006).
8.
CONCLUDING REMARKS
The
world is short of business models in the domain of smartphone business. It is
battle of the supremacy between manufacturers of the handsets versus mobile
operating system providers. Though the world of mobile OS is divided between
Google, Apple, and Microsoft, but it is now between Android V/s rest OS
providers. This is evident from the data given in table A1, A3 and A4. This is
the reason author termed Mobile OS world as a unipolar world. At the moment
mobile operating system providers have upper hand over handset manufacturers.
Hall (2013) mentioned that Microsoft has acquired Nokia “to accelerate its
share and profits in phones, to create a first-rate Microsoft phone experience
for its users, to prevent Google and Apple from foreclosing app innovation,
integration, distribution and economics”.
Many
initiatives are taken by Nokia similar to the competitors. To mention, Samsung
has branded Android products around Galaxy. In response, Nokia also tried to
use Lumia. Rebranding of "Nokia Maps" to "HERE Maps" on
non-Symbian platforms makes a total sense because map side of Nokia is free to
expand in other markets (LITCHFIELD, 2013). It has been reported that Nokia’s
execution has been shoddy in recent years; it doesn’t mean it can’t make a
comeback with Windows Phone. Nokia and Microsoft have huge assets. It may come
out to be a good chemistry & Windows Phone may be a great success. Even,
Nokia’s Mobile Telephony Patents may put a Strain on Korean Handset
Manufacturers.
Microsoft
may bring in to the market powerful combination of low-cost, secure, functional
smartphones. It may integrate across multiple devices e.g. smartphones, PCs and
game console, that can meet the requirement of individual and businesses users.
Microsoft can incorporate Yammer, Skype, Xbox, Outlook and Office to compete
with Google Android. Recent entry of new
operating system players like Ubuntu, Firefox and Tizen will make war of
smartphone operating systems very interesting in days to come. In addition,
growth of small local vendors will provide a good competition to Microsoft. To
mention, two local vendors such as Micromax, Karbonn in India are competing
with international brands as can be seen from the data given in Table A5 &
Table A6.
The
bigger issues with Microsoft could be integration of the employees of Nokia as
well as phone business, competing with Google, be a device company or a
services company. It is not like Google at the moment as Microsoft is not
removing Nokia employees from jobs. It is in line with findings of Lin and Wei
(2006). Buyout also proves the synergy trap hypothesis of Myeong-Cheol Park, et
al. (2002). For other two hypothesis data is not yet generated by the merger.
In
the end, it is summarized that present Mobile OS world is “Unipolar” world as
far as mobile operating system is concerned. Still the ecosystem will consist
of many Mobile OS players which will compete successfully with Android, and all
categories of mobile phones manufacturers due to economic conditions of the
users in different parts of the world. It will include international, national,
as well as local brands. This conclusion is somewhat in line of conclusion of
Singh and Nayeem (2011) in case of expansion strategies of biggies in Business
Intelligence domain.
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