Microsoft Inc. announced on Sept. 2 that it would be purchasing Nokia’s Devices and Services business for around $7.2 billion. The deal comes on the heels of a two-year strategic partnership between the two companies, which had been designed to help Nokia recover from market share losses to other smartphone vendors. Since 2012, all of Nokia’s smartphones have exclusively used the Windows Phone mobile OS, and its Lumia product line has been an important asset to Microsoft.
In recent years, Apple and Google have dominated the smartphone market, selling 31 million iPhones and 187 million Android phones respectively in 2013’s second quarter. In comparison, Microsoft has only sold 8.7 million Windows phones. The company hopes that its purchase of Nokia’s devices unit will serve to strengthen its success with phones, allowing it to increase profits and break farther into the smartphone market.
Stephen Elop, Nokia’s CEO, will rejoin Microsoft to head the devices division. Elop previously worked for Microsoft as leader of its business division, before leaving to join Nokia in 2010. Elop believes that the purchase will allow a new breakthrough in the consumer sector, saying “With this transaction we can accelerate our current movement and gain a stronger financial backing to be more successful in the mobile market.”
Many have speculated that Elop is a prime candidate to replace Steve Ballmer as Microsoft’s CEO, after last month’s announcement that Ballmer will be retiring in the upcoming year. However, Ballmer has stated that the deal to buy Nokia was in place long before he made his intentions public.
Companies other than Nokia, such as HTC and Samsung, also produce Windows Phones. However, these companies also manufacture products for other platforms, like Android. Since Nokia has been willing to work exclusively with Microsoft, they have already become one of Microsoft’s largest hardware suppliers. With its device division stripped away, the now-shrunken Nokia will focus on licensing and development, location-based services, and network infrastructure.
Microsoft’s rebrand of itself as a company that produces both software services and hardware devices will gain new strength from its acquisition of Nokia’s device department. The deal is expected to close in early 2014.