How Microsoft-Nokia differs from 2011 deal

How Microsoft-Nokia differs from 2011 deal

Summary: Microsoft had an existing strategic partnership with Nokia, so what's different in 2013 with the purchase of its devices and services unit compared to the 2011 partnership?

SHARE:
15

No one can say that Steve Ballmer is a lame duck CEO. While others may ride out their tenure quietly, Ballmer up and bought Nokia's devices and services unit, adding over 30,000 employees to Microsoft and arming the company with a proven--but hobbled--device manufacturer.

With yesterday's announcement, Nokia will retain three business units comprising its network offerings, HERE mapping platform, and a new business called Advanced Technologies.

Reading the coverage about Microsoft's purchase this time, I feel a sense of déjà vu. Here's a look at the official statements released in 2011, and yesterday, announcing their partnership:

couple-holding-hands-sunset-marriage
Microsoft-Nokia: for better or worse?

2011 – Nokia and Microsoft announce plans for a broad strategic partnership to build a new global mobile ecosystem.
2013 – Microsoft's strategic rationale for deal announced with Nokia on September 3.

2011 - Nokia would adopt Windows Phone as its principal smartphone strategy, innovating on top of the platform in areas such as imaging, where Nokia is a market leader.
2013 – Nokia Devices and Services (D&S) division brings key capabilities ("Accelerating Innovation" is the tagline).

2011 - Nokia would help drive the future of Windows Phone, where it would contribute its expertise on hardware design, language support, and help bring Windows Phone to a larger range of price-points, market segments, and geographies.
2013 – Nokia D&S brings key capabilities ("Accelerating Innovation").

2011 - Nokia and Microsoft would closely collaborate on joint marketing initiatives and a shared development roadmap to align on the future evolution of mobile products.
2013 – Clarity helps make the market for all Windows Phones ("One Brand, United Voice").

2011 - Bing would power Nokia's search services across Nokia devices and services, giving customers access to Bing's next-generation search capabilities. Microsoft adCenter would provide search advertising services on Nokia's line of devices and services.
2013 – Little emphasis on Bing aside from "Office, Skype, Xbox Live, SkyDrive, Bing at Microsoft" mentioned in "High-value services including geospatial".

2011 - Nokia Maps would be a core part of Microsoft's mapping services. For example, Maps would be integrated with Bing and adCenter advertising platform to form a unique local search and advertising experience.
2013 – Microsoft gets flexibility to integrate Nokia's HERE map platform with other experiences, becoming a strategic licensee and will pay Nokia separately for a four-year license. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services. 

2011 - Nokia's extensive operator billing agreements would make it easier for consumers to purchase Nokia Windows Phone services in countries where credit-card use is low.
2013 – "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," said both companies.

2011 - Microsoft development tools would be used to create applications to run on Nokia Windows Phones, allowing developers to easily leverage the ecosystem's global reach.
2013 – Nothing mentioned about development tools; an empty talking point in 2011 anyway.

2011 - Nokia's content and application store would be integrated with Microsoft Marketplace for a more compelling consumer experience.
2013 – Nothing mentioned; perhaps the Nokia apps will be made available to all Windows Phone users.

So what did Microsoft get for its purchase compared to the 2011 partnership? Nokia's patents, a device hardware team, a global supply chain, and 30,000 new employees.

Topics: Smartphones, Microsoft, Nokia

About

Howard spent 14 years in the tech industry working as a programmer, evangelist, and community manager for Microsoft. In 2009, he had lived his "dream" of middle-management long enough and opened a Japanese restaurant called Standing Sushi Bar. Trading in stock grants and software licenses for raw fish and cash, he enjoys mixing his passion for technology into the daily hustle of small business.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

15 comments
Log in or register to join the discussion
  • Well, well, well

    If Elop can kick a few of the MS fuddy-duddys into the real world and deliver some half-way decent Nokia-developed hardware at competitive prices then it'll go well for MS. MS has a record of being a little bit too precious about its self-perceived brand-value and that's the reason that Surface tablets have been disappointing. It's not the hardware but the asking price! If Elop can't bring the puffed-up MS bureaucrats to heel then it will be a continuation of the decline for both MS and Nokia.
    KRP1950
  • Microsoft need to come out of "US is everything" mindset

    The main problem with all the Microsoft products(hardware) till now is they did not care about the rest of the world.
    They thought success in USA is more important.

    They did not bother to release the ZUNE in many international markets.
    They did not bother to release surface tablet in many Asian, European markets. They botched the launch by releasing it only Microsoft stores (nothing exists outside US) and online.

    They need to follow Nokia's model to gain market share by catering all the price points rather than making premium products and selling them only in few countries.
    sri_tech
  • The real loser in this...

    is any of the Asian manufacturers that thought Microsoft was a good guy. There is no room for a competitor for hardware now that Microsoft is producing it's own hardware. They will ALWAYS change the hardware and software so your phone is buggy. It's their way!
    Tony Burzio
    • They should be moving to Android or Linux systems

      for everything. If nothing else than to have a club to beat MS licenses down to something tolerable.
      jessepollard
      • Already moved to Android

        @jessepollard - It seems like most of the manufacturers have already moved to Android and are only nominally making handsets for Windows Phone. It doesn't seem like HTC and Samsung have invested much marketing money in promoting their Windows Phones versus their Android phones.
        Howard.Lo
        • Reduced Risk/Android Vulnerability

          "So what did Microsoft get for its purchase compared to the 2011 partnership? "

          In addition to the patents which will give Microsoft some substantial economic and operating benefits (see Florian Mueller's post on fosspatents.com) and the elimination of redundancies and costs built into an arm's length relationship, I would argue Microsoft eliminated an enormous strategic risk - the potential loss of the partner which sells 80+% of Windows Phones.

          If Nokia's ability to perform wavers due to its financial difficulties, a revolt by shareholders or the board of directors, or because of overtures, hostile or otherwise, from third parties, then Microsoft will be damaged. Nokia is so important to Microsoft's mobile future, they had to buy it to keep it safely focused on Microsoft's agenda. Too much exposure otherwise.

          Circling back to the patent issue, Android has some vulnerabilities. Namely, courts in the US and Europe have very consistently found Android to infringe patents. Under the terms of the Nokia sale, Nokia retains control of their utility patents which they are currently using to sue HTC claiming infringement by Android.

          If Nokia too forces handset makers to pay royalties for Android on top of the royalties paid to Microsoft, and seemingly soon to be paid by Samsung to Apple, then handset manufacturers distributing Android might well end up with higher costs per unit than a Windows Phone license.

          Given the current market share of Android, maybe the manufacturers wouldn't mind and would just swallow the necessary costs. But then there is the other vulnerability of Android: Google.

          Google retains dominant control of the OS and may not prioritize manufacturers agenda which in term may lead to code fragmentation and competitive disadvantage. This is a threat to manufacturers.

          Those vulnerabilities are why Samsung and other manufacturers support development of the Tizen OS (initiated by Intel), a Linux-based, open OS with many similarities to Android, but with less of a Google/Motorola problem. I think manufacturers would like to move to Tizen sooner rather than later.
          Jgarrettca1
          • Nokia and MS already agreed to collaborate on patent litigation

            I don't see that MS gets a whole lot more out of licensing the patents than they already had with the 2011 agreement to collaborate on patent litigation opportunities.

            Removing the risk of someone else buying Nokia, that makes sense.
            daboochmeister
          • The Patents Are Important

            The best observer on this that I have found is Florian Mueller. Check his blog at fosspatents.com. Microsoft is a client of his, but he lays out a logical case for why the patent arrangement will exert pressure on distributors of Android. I think Motorola will eventually license too as have 20+ other Android distributors.

            As I noted previously, Android is so dominant manufacturers will likely decide the additional cost is part of participating in the market. In itself additional patent licensing fees for Android won't force a change in OS. But I do think such pressure and Google's grip on Android make an eventual move to Tizen (also Linux) more attractive.
            Jgarrettca1
          • Re: potential loss of the partner which sells 80+% of Windows Phones.

            Still pretty likely to happen anyway. Such acquisitions have a high likelihood of going badly wrong, and Microsoft's recent history in particular (Aquantive, Danger etc) is not encouraging.
            ldo17
  • A bit sad.

    From world top to vanish totally.

    Nokia will join its other European brothers like Ericsson and Siemens as another fallen comrade.
    victorcwk
    • Maybe this is the rebirth

      @Victorcwk - maybe this is the (major) kick in the pants that both Nokia and Microsoft needed. After spending 8 billion dollars to acquire Nokia's devices division, I imagine there has got to be some pressure to produce!
      Howard.Lo
  • Missing a huge point

    They got their largest smartphone OEM to be locked into Windows Phone and never explore an alternative. Nokia owns the market. If they decided to leave at the end of the partnership or get out of/alter the deal, Microsoft I'd back at square one and likely done in the smartphone world.
    ikissfutebol
  • Yes, biggest difference now is that Nokia is locked into Windows Phone...

    where before they had chosen Windows Phone. With Blackberry struggling, Microsoft/Nokia will likely pickup another 4 or 5 % of market in the not too distant future (assuming they don't mess up badly). Unless they can get China or India to really jump on board with Lumia/Windows OS, I don't know that they will ever do really well. They still have not provided a major reason for those happy with iOS or Android to move to Windows Phone.
    jkohut
  • More and more, seems like it was a risk-avoidance

    I read a theory (can't remember which of the tech blogs, but it was one of the major ones, not just someone spouting off) that Nokia was about to be bought by a company that would have stopped producing WinPhones (e.g., HTC or Samsung). At first, I didn't give it much credence, but with more thought, it's actually seeming very possible.

    It would have been a total disaster for MS if the company manufacturing 80% of all WinPhones simply stopped. And more and more it's becoming apparent that the Nokia market presence in featurephones would have made it very attractive to a number of competitors.

    Which brings up the question - why are these Nokia divisions being sold to MS without at least exploring the potential other suitors? Is that in any way in the best interests of the shareholders? While the board may have entertained other offers, there's been no indication to the shareholders that such happened - giving it every appearance of a contrived decision.

    If that's the case, I would think this could very well get interesting - e.g., if shareholder momentum builds to force an open bidding, rather than simply accepting the MS offer. Certainly there's been a great deal of unrest with the commitment to WinPhones, in spite of such a dramatic plunge in market share and company value ... could this bring it to a head?
    daboochmeister
    • Good Point

      What Microsoft is getting for their $7 billion looks like a steal compared to Google's $12 billion deal for Motorola Mobility. Nokia has much better mobile IP, trendier products and better worldwide market presence and branding.

      I too wonder if Nokia couldn't have sold higher if they auctioned themselves rather than negotiating exclusively. However, I read a comment from a Finnish analyst who basically said no one would pay a premium for a struggling company like Nokia. I tend to disagree, but perhaps he is right. Or perhaps Nokia's board was trying to find a scenario which not only offered a fair price, but also offered the best chance for Nokia's handset employees to continue their employment.
      Jgarrettca1