Image via CrunchBase
Image via CrunchBase
A rumor is making the rounds about Microsoft buying Nokia and long time mobile industry watchers over at the Yankee Group are biting.
To be fully transparent, as a former agency to Nokia (I devised and my agency managed their groundbreaking and highly successful Nokia Blogger Relations program in 2005 and ran it through 2009) I was well aware of their strengths--solid product design, lower cost of manufacturing, widescale distribution around the world and weaknesses, poor USA distribution, an overly matixed management style, inherently corporate vs. country rivalries and a silo'd approach to management and implementation.
The reason we succeeded was our mandate came from outside the normal chain of command with the original intent of selling smartphones to consumers well before something called the iPhone came along. The goal, which helped build non-carrier specific oriented distribution worked and our work did just that, something the Washington Post recognized.
Fast forward. Nokia went into a tizzy about 2010. Major reorgs, defections, departures of leaders. A crappy economy world wide and of course Android and Apple. At the same time, Windows Mobile is going nowhere fast. Windows staunchest supporters HTC, Dell, Motorola all now are Android Fan Boys (for a bit) and HP buys Palm. MSFT is left without real handset partners and the Windows Mobile App Market, despite it's size isn't even thought of when you talk about developer programs.
So. Why does Microsoft want Nokia? To design and build handsets for the OEMs. Microsoft is a licensing company. They don't really "retail" anything. They sell through channels and are really bolstering their efforts with the big mobile operators around the globe, starting here in the USA with AT&T and Verizon, while working in Europe and Latin America with the likes of DT, Vodafone, Telefonica, Orange before going wider later in 2012. That would coincide with the rumor Yankee Group is running with.
By taking on Nokia as an asset, Microsoft can buy them with cash sitting offshore. With the Euro declining it becomes a cheaper buy on a dollars basis. That asset then becomes a design (i.e. reference designs for the OEMs), manufacturing (again for the OEMs) and technology (software for the OEMs) division, but none of the handsets will say Nokia or Microsoft. They become ultimately, DELL, HP, HTC, ASUS, SAMSUNG, etc. Add in the carriers who a) hate Apple - only because Apple beat them six ways to Sunday and b) don't trust Google at all-feeling that Google looks at them (the mobile operators) as the next layer of the dumb pipe. On the other hand, Microsoft looks at them the other way. Sell MSFT Kinnects, XBoxes, Live365 to consumers, more of Lync, Exchange, servers, SQL to the Enterprise, connect those OEM'd laptops, tablets (there will be a bunch shown at CES) running Windows 8, the same version of an OS that will be tweaked to work on smartphones and tablets and you have a full eco-system.
By buying the Nokia's handset manufacturing and distribution business Microsoft gets a global powerhouse that when combined with their sales teams, and an already installed customer base at enterprise and SMB, you have a very strong combination for growth.