Microsoft acquires Nokia to gain smartphone market foothold

Some analysts are skeptical the acquisition will solve Microsoft’s major issues

When most people think of smartphones, one of two words come to mind: iPhone and Android. But there is another mobile operating system on the market that is also very popular. Microsoft Windows’ most recent activity displays the company’s desire to have a stronger foothold in the mobile computing industry, but some analysts are skeptical their moves will have any impact at all.

Last week, Microsoft Corporation announced the purchase of Finnish mobile phone leader Nokia Corporation for $7.2 billion. The agreement says Microsoft will acquire Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services.

Nokia and Microsoft have worked together for over two years, as Nokia’s Lumia brand of phones run Microsoft Windows operating systems. According to Microsoft CEO Steve Ballmer, Microsoft’s preexisting familiarity with the mobile company should allow the pair to hit the ground running.

“We are excited and honored to be bringing Nokia’s incredible people, technologies and assets into our Microsoft family,” Ballmer said. “Given our long partnership with Nokia and the many key Nokia leaders that are joining Microsoft, we anticipate a smooth transition and great execution.”

Ballmer also added that Nokia brings “proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution.”

However, some observers do not believe that bringing Nokia under the Microsoft umbrella will make a major impact at all. Dave Johnson of CBS News’s Moneywatch writes, “One measure of the merger is to ask a very simple question: Are you likely to purchase any phone that's born from this marriage? The answer, I think, is ‘no.’ And that's not a promising start to NokiaSoft.”

Microsoft’s operating system holds just 3.5 percent of the smartphone market, according to Johnson. While the Nokia acquisition may improve company synergy and allow Microsoft to make more money per unit sold, Nokia’s addition still doesn’t address the question of applications for the operating system. Johnson says, “Unfortunately, virtually none of [the key] products have Windows Phone apps. That locks an increasingly tech-savvy, connected set of customers out of Microsoft's mobile universe.”

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