Why has Microsoft been pursuing high-value acquisitions?
Microsoft has undertaken two major acquisitions in the last three years
In the previous articles of this series, we’ve discussed high-value acquisitions that companies like Facebook (FB) and Google (GOOG) have undertaken recently in the technology sector. In this article, we’ll discuss the high-value acquisitions that Microsoft (MSFT) has undertaken in the last three years. Microsoft acquired Skype for $8.5 billion in May 2011 and then acquired Nokia (NOK) for a valuation of $7.2 billion in September 2013.
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Why did Microsoft acquire Skype?
Microsoft’s acquisition of Skype was primarily designed to fend off competition from Google and Cisco (CSCO) in the enterprise collaboration market. It also helped Microsoft become a key player in the mobile voice-over-IP market. Another reason for buying Skype was that Microsoft needed a competitive offering to Google Voice and Apple’s (AAPL) Facetime for its smartphone operating system, Windows Phone 7. Microsoft is still a relatively smaller player in the smartphone operating system market, although it managed to increase its market share from 2.4% in 2012 to 3.3% in 2013, as shown in the above chart. Android and iOS continued to steal limelight in this market.
Why did Microsoft buy Nokia?
Microsoft and Nokia had collaborated since 2011, and they came out with the popular Lumia line of smartphones running the Windows Phone operating system. However, Microsoft needed to do much more to overcome the challenge from Google and Apple in the smartphone operating system market. Owning Nokia would make its operations more comparable to Apple and Google, which make their own mobile hardware. Plus, Nokia was considering adopting the Android operating system platform for its smartphones, which Microsoft wanted to completely avoid, as it would have made the Windows Phone 7 almost non-existent. So Nokia’s devices business acquisition made complete sense for Microsoft.
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