Microsoft and Nokia had already formed a partnership a couple of years ago, as both these former titans tried to get back up to speed with markets that had left them behind. Microsoft has lost its crown as the leading computer company, as it has failed to keep pace with the shift away from desktop computing to portable smartphone and tablet technology. Nokia, for its part, has fallen behind in the migration towards Android phones.
So what does Microsoft get out of this deal for its €5.44 billion? Firstly it will take over Nokia’s current smartphone infrastructure, and secondly it will have ten-year rights to the patents Nokia has lodged in the smartphone arena. Finally, it will also be able to take its pick from the top-tier management and cutting-edge sector intelligence.
This is a dramatic plan of action by Microsoft, in which it will not only be providing the software and technology for devices, but also overseeing manufacture. In all of its other operations, Microsoft has previously subcontracted manufacturing, so it will be particularly interesting to see how well it manages this. We could see changes in other areas of the business as a result.
Microsoft has been falling behind the likes of Apple, Siemens and Google in this market, so arguably it needed to do something dramatic. Only time will tell if this is a stroke of genius or the last desperate throw of the dice.