A purchase of Nokia’s phone business by Microsoft was announced recently. The massive 7.2 billion purchases are certain to shake up the business and mean big changes for both Microsoft and their customers. The Finnish phone company had been struggling in the smartphone market, having lots of trouble keeping up with the popular models like Apple’s iPhone and the Samsung Galaxy. Nokia switch to the Windows Phone OS two years ago as their primary operating system, so they have had deals with Microsoft in the past.
Carolina Milanesi, an analyst at Gartner said, “Microsoft cannot walk away from smartphones, and the hope that other vendors will support Windows Phone is fading fast. So buying Nokia comes at the right time.” Buying Nokia is a smart move for Microsoft fiscally if they plan to stay in the smart phone market. Development and marketing costs leave them with only $10 profit from current Nokia phone sales with the Windows Phone OS, but after the purchase each phone will gain them $40 profit. That increase will add up quickly. Even so, it will still take some time before the company is fully profitable. It takes roughly 50 million smartphone sales a year to break even on production and marketing costs. It will be quite some time before they reach those levels of success, as Nokia’s last quarter only turn out 7.4 million smartphone sales. In 2007 Nokia had 40% of the phone market, now they hold just 15%, only 3% of which are smartphones.
Nokia CEO Stephen Elop has been chosen to return to Microsoft after leaving the company in 2010. Elop managed Microsofts business software division before leaving. He will now head the “Expanded Devices” unit, alongside Julie Larson-Green, who in July was promoted to head of New Devices. Elop commented on the acquisition saying, “It’s very clear to me that rationally this is the right step going forward.”
So what does this mean for consumers? More Windows phones, at better prices. This is really exciting for those of us who work in windows environments, and need to be mobile. Windows phones are great, but there isn’t a lot of options at the moment. With this purchase, Microsoft will be able to produce them at a cheaper cost and have better control over R&D. Those of us who like the feeling of the Windows OS, or the IT staff who like the manageability of Windows devices, should be very happy with this purchase. If Nokia knows how to do anything, it is how to build solid phones. Their recent releases, like the Lumia 920, 928, and 1020 show this to still be true.