Must-know: Why Microsoft will benefit from its Nokia acquisition

Puneet Sikka - Author

Jun. 2 2014, Published 9:00 a.m. ET

Microsoft’s gaining strength in the cloud market but lagging behind in the mobile market

In the previous parts of this series, we discussed how Microsoft’s (MSFT) strategy has changed to a mobile-and-cloud-first kind of approach. We also discussed how Microsoft’s cloud products, such as Office 365 and Azure, are leading Microsoft’s growth in the cloud services market. However, Microsoft has been struggling in the mobile market. As the chart below shows, Windows Phone’s share in the smartphone operating system market is a minuscule 3.3% as of 2013. Google’s (GOOG) Android operating system dominates this market and has a share of about 79%, while Apple’s (AAPL) iOS is second at 15%, and BlackBerry (BBRY) fourth at around 2%.

Acquiring Nokia was important for Microsoft

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On April 25 this year, Microsoft successfully completed its acquisition of Nokia (NOK). During the 42nd Annual JPMorgan Global Technology, Media and Telecom Conference on May 20, Microsoft’s management explained three main reasons for acquiring Nokia: “First of all it gives us fantastically prog and hardware design that would have otherwise taken us much longer to get through organically. Secondly, much greater supply chain capability and distribution capability. Nokia has got capability of delivering relatively low cost products to all corners of the earth on a very profitable basis that again would have taken Microsoft years to get to at an organic pace.”

Microsoft’s management further commented, “The third thing which really sort of I think gets to the anchor point of your question is it gives us the ability through being able to provide first party hardware on all form factors from the phone to the tablet to the large conference room systems and everything in between. It gives us the ability to actually design software for all of those form factors to create a better user experience, whether that user be a consumer or a commercial based customer.”


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