Microsoft reportedly pondered buying Nokia, bailed

Microsoft reportedly pondered buying Nokia, bailed

Summary: The plan was to combine Microsoft with a device maker with scale and then go after the likes of Apple and Samsung.

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Microsoft reportedly was in talks to buy Nokia's device unit, but talks broke down.

According to the Wall Street Journal, the move, which isn't all that surprising given the companies' tight partnership on Windows Phone, is the second report indicating that Nokia may be on the block. Huawei may also be interested in buying Nokia.

nokialumialine

The plan was to combine Microsoft with a device maker with scale and then go after the likes of Apple and Samsung. In theory Nokia would give Microsoft the scale to crank out Windows-based tablets as well phones. What's unclear is whether actually owning Nokia would provide any real benefit to Microsoft's market share.

It's also notable that the Journal story noted that Microsoft walked away due to Nokia's placement in the smartphone pecking order. That reality could indicate that Microsoft thinks it needs a new horse to make a dent in the mobile market. Samsung is closely aligned with Google's Android.

Microsoft is in a battle with BlackBerry to be the No. 3 smartphone platform. Windows Phone is ahead for now, but BlackBerry's Q10 appears to be selling well. In either case, Microsoft and BlackBerry are vying to be a distant third to Apple and Samsung.

Topics: Microsoft, Mobility, Nokia, Smartphones

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31 comments
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  • Nokia

    Yup, Microsoft bailed out. And they will have to bail out of the mobile OS market if Nokia decides to dump Windows Phone for Android.
    The_observer
    • Nokia and Android?

      There is only one company that made an outstanding gain on Android OS and that is Samsung. But many others failed to make a gain on Android OS.

      Now the question is "Can Nokia make success out Android OS?" I think if Nokia ever makes a move into Android, it will be the beginning of the end of Nokia. I do not think I need to explain the reason.

      Had Nokia adopted Windows Phones earlier than it did, today it would have been in a better position.

      However, does Microsoft need to buy Nokia? I am not sure what this would lead to. However, Nokia now needs to focus on how to win; and to win they need to think about two important factors: the price war, while quality is not compromised; and better way of delivering the message to its target market.
      Wonder.man
      • HTC makes a gain too

        HTC is not doing as good as Samsung but it is still making profit. Since the adoption of Android, HTC is always at a much better position than Nokia.

        LG got serious quality issues during the last 2/3 years and it is improving. Therefore, its sales is growing now.

        Sony and Moto failed even before Android exist. Android is not really the reason why they failed (they are not successful mobile phone companies no matter which OS they are using).

        Nokia adopted WP since 7.5. It is the earliest time that Nokia can adopt it. Only idiot expects Nokia can become successful by using WP7.
        Rockchan
        • Re: HTC makes a gain too

          And not just HTC, but LG, Sony, and a bunch of others.

          Android is still wide open for new developments.
          ldo17
          • Microsoft reportedly pondered buying Nokia, bailed

            Well considering everything M$ buys they wind up destroying, I'm not sure this would make much difference with Nokia, a company that going on the cheap with cheap throaway phones.
            CaviarRed
          • Cheap through away phones.?

            kind of like your cheap through away comments?
            William Farrel
    • Well at least MS gets a cut of the action with Android

      Don't they get around $15 per handset from licensing?

      I played with a friend's Lumia 927 the other day and it is a very nice phone....but yet, I just don't think it has enough to make me want to switch.

      On the other hand, I wish Android would improve their bluetooth support, my headset drops out regularly for no reason and my fitbit won't sync.
      otaddy
      • Re: Well at least MS gets a cut of the action with Android

        Doesn't seem like it's anywhere near enough to make up for the carnage Android is inflicting on Microsoft. Why else are they complaining to the European Commission about Android? After all, Microsoft is a big, grown-up company, perfectly capable of taking care of itself; it's not going to run to Mama every time it skins its knee.

        No, Android is killing Microsoft.
        ldo17
        • "No, Android is killing Microsoft"

          Good!
          CaviarRed
    • Nokia is failing.

      They've sold nearly everything they can sell including their century-old Espoo headquarters and their US headquarters. They're renters now. Their factories and Symbian and almost all of their exlusive rights to their IP too. They've lost 30% volume on both smart and feature phones in the last year, and lost money on every one.

      Microsoft's "Platform support payments" have been propping up Nokia's cash flow for the last year, with licensing for maps and apps. Now the balance of cash begins to flow the other way. Instead of a float to cashflow it becomes a sink - just as Nokia's cash flow dives.

      Having offloaded a lot of their pension liability to third parties who are even now terminating Nokia's former employees, and having lots of cash left, Nokia won't go under right away. But barring a miracle it's almost certain.

      Microsoft is in no hurry. They have irrevocable licenses for most of Nokia's IP now and a "change in control" of bankruptcy will give them ownership in fee simple. Microsoft was never going to buy Nokia but dancing with them gives them a better look at the books so they can see when to knife the baby. Now that Microsoft will own their IP, nobody else will want Nokia either. The company is unsalable.

      This was the plan from day one.
      symbolset
      • Axe to grind?

        1) Espoo House was first occupied in 1997. Using contemporary math, that's nowhere near a century old. (All you have to do is look at the buildings to realize they aren't from the early twentieth century... duh?)

        2) They have closed factories in Europe but opened new capacity in APAC. They are trying to reduce logistics (and probably personnel) costs by getting closer to their parts suppliers (and lower-cost labor).

        3) Please back up the statement about "almost all of their exclusive rights to their IP" - Nokia still owns the patent portfolio that generates $600M a year in revenue and continues to create more.

        4) Platform support payments are NOT tied to maps. And I am sure that device costs incorporate licensing. Nokia has a very mature system of suppliers, production sites, and logistics that supported the largest manufacturer of mobile phones in the world for a quarter of a century. Their efficiency at producing phones will keep costs low as the offset from MS is no longer in play. (Take a look at teardown videos for the Lumia 920 versus one of the newer models - you will see quite a bit of optimization in the design.)

        5) I seriously doubt that cash on hand will take a hit in the upcoming financials. You can bet that Nokia's focus on reducing costs and increasing output/ASP/share takes into account an easily-predictable transition from the support payments to licensing outlays. The agreement means $600M (or was it euros?) net from Nokia to MS over the (undisclosed) life of the agreement. (Although arguably that could be more if Nokia was too conservative about estimating their device sales at the time that Elop disclosed this earlier this year.)

        6) Any reduction in force (and admittedly, there have been several in the last 5 years) comes associated with huge restructuring costs, including personnel costs such as separation packages, pensions, accrued vacation, career counseling, etc. Like Siemens, Nokia has made the choice to focus on some core capabilities and divest and/or cancel non-essential programs. However, most of these costs have already been realized over the last 2-3 years and are no longer impacting the financials.

        7) There needs to be a bankruptcy before there can be any outcome from bankruptcy. It's quite a bit early to presume that the second-largest manufacturer of mobile devices in the world is on the brink of disaster.

        I think maybe you need to ramp up your research. Or, you might be ex-staff with an axe to grind, I don't know. But you certainly seem biased to the point of being ignorant (or dismissive) of many of the facts in the case. Certainly, your conclusions are a matter of opinion and not supported by any facts.
        jeffdp@...
        • The reality, jeffdp@...

          "2) They have closed factories in Europe but opened new capacity in APAC. They are trying to reduce logistics (and probably personnel) costs by getting closer to their parts suppliers (and lower-cost labor)."

          You mean sweatshop labor. Foxconn labor. Right?

          Let's see...Verizon only sells one Nokia phone, the Lumina 822 and it goes for $9.99 not including Verizon's outrageous data plan to go along with it.

          It goes for $9.99 on the cheap because supply grossly outstrips demand. Nobody's buying it. They might as well waive the $9.99 and give it away for free because it won't make much difference. It wouldn't surprise me at all if this happens before the plug is pulled like the Kin was.

          The rest of your post is just face-saving dribble.
          CaviarRed
          • Nokia 928

            Verizon just started selling the 928, and it's the best Nokia phone, Windows Phone and mobile phone on the market -- right now.
            Tojuro
          • Best phone?

            Sure...maybe in Estonia...

            lol...
            CaviarRed
  • Device Maker with Scale

    Who's that supposed to be? Nokia has/had plenty of manufacturing capacity. They also have the largest Windows Phone following by far. Whom exactly should Microsoft buy that would provide better 'scale?' You can't get a bigger Windows Phone manufacturer, and buying Apple or Samsung is not exactly an option. Buying HTC or another of the Android also-rans is not going to magically add 5 or 10% market share to Windows Phone.
    WebSiteManager
    • Manufacturing capacity?

      Nokia sold their factories. They outsource that now.
      symbolset
      • Outsourced factories

        Link?

        Nokia has 8 company-owned manufacturing facilities:

        Manaus, Brazil; Beijing and Dongguan, China; Komárom, Hungary; Chennai, India; Reynosa, Mexico; Hanoi City, Vietnam; and Masan, South Korea.

        In the last 5 years, they have closed plants in Salo, Finland (1700 jobs, closed in 2012); Cluj, Romania (2200 jobs, closed in 2012); Bochum, Germany (2300 jobs, closed in 2008).

        Between 2007 and 2012, Nokia's manufacturing headcount in Asia doubled from 25,000 to 51,000, although I do not know what percentage of those jobs are Nokia proper vs. NSN.

        Vietnam factory will employ 10,000 by the end of 2014, which is a net increase of ~2800 over the number of jobs lost in European factories over five years.

        You have NO credibility now.
        jeffdp@...
        • Slave labor factories

          And you defend that, jeffy-poo?
          CaviarRed
  • Neither the Z10 nor the Q10 are selling well.

    BB had better come up with something besides a new playbook tablet to save the company because mobile phones aren't going to do it. As for MS+Nokia the WSJ has no idea who walked away or why. They have hearsay, probably midlevel at that. The fact is an MS+Nokia would probably grow smart phone market share slower than Nokia by itself. For the last 3 years MS has proven that it doesn't care about advertising or marketing WP, doesn't care that carriers shove it to the back of the store and have their sales staff bad mouth it, etc. They have been content with platitudes, from their OEMs, their carriers, and their own in house decision makers. Do you really think Ballmer would put up with MS "it's out of our hands" tripe for 3 years of marketing abject failure if it was a priority to him? Now Bing is a different story. Given the massive shift in search to mobile you'd think Bing would be crapping bricks about WP marketing. Imagine the impact to Bing if WP was at 25-30% share. Therein lies the apple + Bing deal.
    Johnny Vegas
    • Coming from Johnny Vegas

      "For the last 3 years MS has proven that it doesn't care about advertising or marketing WP, doesn't care that carriers shove it to the back of the store and have their sales staff bad mouth it, etc."

      "What happens in Vegas, stays in Vegas." :):)....
      RickLively