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Microsoft announced that it is acquiring Nokia’s handset and services business along with certain licenses to Nokia technologies for $7.1 billion.  The remaining business of Nokia will remain an infrastructure, navigation services, and IP vendor.  Here are some initial thoughts from the Mobile Devices team at ABI Research on the opportunities and obstacles ahead for the proposed acquisition.

 

Opportunity:

  • Nokia leadership become Devices division of Microsoft.  Handset R&D remains in Finland for now.
  • Microsoft makes the case for buying its leading smartphone OEM; make more on device gross margin than licensing Windows Phone to Nokia.
  • Nokia improves its balance sheet by focusing on the NSN infrastructure, HERE navigation services, and revenues from IP licenses.
  • Nokia was the second largest mobile handset vendor in terms of unit shipments for 2Q'2013, according to our quarterly tracker.

 

Obstacles Ahead:

  • Windows Phone on Nokia may be the 3rd largest smartphone OS platform as of the most recent calendar quarter (3.5% share), but questions remain about profitability of the Lumia line.
  • Nokia tablet still coming out? If so, the unannounced tablet going through regulatory certification now would be in conflict with Microsoft’s own Surface devices.
  • Microsoft tried the smartphone OEM route before; remember Kin?  Nokia certainly has the team and the sales channels beyond what Microsoft has done with Kin and even the Surface tablet.  Is it enough to make Nokia a significant player in underpenetrated, emerging markets and viable for prosumers and business audiences - at the same time?

 

 

 

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