Simply put, Microsoft’s agreement to buy Nokia’s Devices & Services business for $7.2 billion is about mobile. Yet as analysts
noted on Tuesday, there is nothing straightforward about the software giant’s urgent efforts to remain relevant in an ever more mobile
world.
As Microsoft appears poised to adopt a vertically integrated strategy more akin to Apple's, Forrester analyst
Charles Golvin said the company faces a huge challenge: “How to unite the myriad services and brands (Windows, Nokia, Live, Surface, Xbox, Bing, etc.) into a cohesive customer experience that
will command and cement customer loyalty.”
Meanwhile, “Microsoft must make a decision on the business model to adopt in
mobile,” Ronan de Renesse, Analysys Mason principal analyst, commented in a note on Tuesday. “The handset market is extremely competitive making it particularly hard to sustain high
margins and make a profit.”
With the deal, “Microsoft has now proven that it is willing and able to make the tough
decisions to make a vertically integrated product a cornerstone of its business model,” Forrester’s Ted Schadler said on Tuesday. “Apple pioneered the model of vertical integration
in devices -- device [plus] software [plus] services -- Google quickly mastered it.”
Despite the massive price tag, some analysts said the deal would have little to
impact on the mobile marketplace.
“We see little risk to Android or Google's mobile business as a result of the announced tie-up
between Microsoft and Nokia,” Colin Sebastian, a senior analyst at Baird Equity Research covering Internet and Interactive Entertainment, said in a note on Tuesday.
“From a near-term perspective, Windows Mobile represents less than 5% smartphone share [versus Android’s more than 50% share] while Nokia already
accounts for roughly 90% of Windows Mobile devices,” according to Sebastian.
Likewise, “The acquisition will
have a limited impact on the smartphone market in short/medium term,” Analysys Mason’s de Renesse commented in his note.
Added Sebastian: “Longer term, Windows may gain share, especially at the expense of third tier operating
systems, however, we expect handset OEMs to continue favoring Android due to its leading consumer mindshare, significant app developer support, high value mobile apps from Google (e.g., Maps, YouTube,
Chrome, Gmail), and more generally, the fast pace of Android innovation.”
Some Web watchers, meanwhile, said the gravity
of the mega-acquisition couldn’t be overstated.
“Nokia's acquisition symbolizes the end of the old mobile
era,” Forrester analyst Thomas Husson said in a note on Tuesday. “Remember the days when Nokia was by far the leading handset manufacturer with 40% market share in several European
countries? When hardware was everything? These days are gone and now most of the mobile innovation is coming from outside Europe: Think US (e.g, Apple, Facebook, Amazon, Microsoft,..) but also
increasingly Asia and emerging countries.”
As for who will replace Steve Ballmer as CEO, Forrester’s Schadler added:
“I think Microsoft will elevate [Nokia CEO] Stephen Elop's position, possibly to CEO, perhaps at the 11th hour of Ballmer's departure.”