Now before I even begin, we know that this is a rumor and it sure sounds like a wild one. Just months after announcing a deal where Nokia would use Windows Phone as its primary smartphone OS, it looks odd that both companies would start taking a merger/takeover. Given that the rumor comes from none other than Eldar Murtazin, who has a history of hitting the bulls-eye, we sure can consider the scenario where Microsoft takes over Nokia’s handset business. Nokia is said to be valued at over $32 billion and with Skype’s $8.5 bln buyout, we know that Micorosft is going aggressive on mobile.
Why the deal makes sense:
Microsoft isn’t new to doing its own hardware. They have seen tremendous success with Xbox / Kinect and why wouldn’t they want to do the same with smartphones? Apple has already shown how to make killer margins in this same business. Selling licenses to millions of phone makers and selling your own phone to millions of users is a lot different when it comes to profitability.
Given that Android goes out free (yes it does cost manufacturers to implement it), its tough for Microsoft to command killer licensing fees for Windows Phone in todays scenario. Microsoft has started late and Android / iOS have a headstart over them. If you read our Windows Phone OS review, you would notice its a refreshing OS and visually appealing. Sooner or later Microsoft would get on par with its competitors on the software front, but getting to the consumers is a challenge.
Integrating with Nokia, merging services and building an ecosystem is as good as a half marriage. Why not go the full distance? No matter how good the integration with Nokia is, it won’t make Microsoft the kind of money an iPhone makes for Apple. Add to that the competitors would always have a reason to go with Android.
Why it doesn’t make sense:
There aren’t a lot of reasons for turning down the prospects, but two industry giants who have little traction on the smartphone front coming together doesn’t really inspire us. Ballmer has always maintained that their strategy is to have their OS running on maximum number of smartphones across the world and not limit themselves to their own hardware. Buying Nokia would mean taking in the world largest cellphone maker. This isn’t about smartphone or the music / maps services alone. It’s huge!
To begin with, we know that Windows Phone on Nokia isn’t coming anytime soon. May be a single release in the end of 2011 if things go well, else only 2012. Announcing a buyout of Nokia would mean instantly alienating Samsung, LG and HTC. Another year given to HP WebOS, iOS and Android offerings would build massive competition to face. I doub’t any momentum from Nokia-Microsoft would make a significant impact when each of its competing platforms have a lead few 100 million users out there.
Apple sure makes a lot of money with its own hardware+software combination, but is that the future? Aren’t we talking about the future of ecosystems? Apps and beyond? The apps race is underway and services with NFC etc would kick in any moment. There is a lot of money to be made there. At the end of the day it would all boil down to where Microsoft thinks the industry is headed!
