Microsoft's Acquisition of Nokia's Phone Business marks "the failure of both companies" (IHT, Sep 4th)
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Microsoft's Acquisition of Nokia's Phone Business marks "the failure of both companies" (IHT, Sep 4th)

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BRIE-ETLA Seminar talk, Berkeley (CA), September 6th, 2013

BRIE-ETLA Seminar talk, Berkeley (CA), September 6th, 2013

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  • 1. Microsoft’s Acquisition of Nokia’s Phone Business marks “the failure of both companies” International Herald Tribune, 4 Sep 2013, p. 16 Petri Rouvinen, ETLA, www.etla.fi Chaos or Turbulence in Digital Ecosystems BRIE-ETLA Seminar, Berkeley, 6 Sep 2013
  • 2. 1998: Gates in talks w. Nokia Jan 2013: MS-Nokia talks 2006: Nokia & Siemens merge network businesses 2008/9: Google Android Feb 2011: Platform burns Feb 2011: Windows Phone in MeeGo out Jan 2007: Apple iPhone Sep 2010: Elop, Nokia’s CEO Jul 2013: Nokia buys Siemens out of NSN for $2.21bn Aug 2013: Ballmer’s step down announced 3 Sep 2013: MS’s acq. of Nokia devices
  • 3. Preceding rocky rides of Microsoft & Nokia
  • 4. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2008 2009 2010 2011 2012 Source: Gartner. Market Shares of Mobile Smartphone Operating Systems Android Google iOS Apple Symbian Nokia RIM Blackberry Other Windows
  • 5. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Sources: Business Insider, Gartner, IDC, Strategic Analytics, company filings PC, Smartphone and Tablet Operating Systems Together Android Apple RIM Other MS Windows
  • 6. -10 0 10 20 30 40 50 2008 2009 2010 2011 2012 2013 Source: Company releases. Operating Profit Margins, % Nokia Samsung Apple Microsoft Google
  • 7. -10 90 190 290 390 490 590 690 2007 2008 2009 2010 2011 2012 2013 Source: Company releases. End of the year except for 2013, which refers to Sep 2nd Market Value, $bn Nokia Samsung Apple Microsoft Google
  • 8. MS-Nokia Deal
  • 9. Microsoft pays $5bn for Nokia’s devices unit & $2.18bn to license IPRs Nokia retains Rougly what Microsoft paid for Skype in 2011 or Nokia for Navteq in 2007; under 10% of MS’s cash Current Nokia split to half – New Nokia: NSN, location-based services (Here), IPRs
  • 10. Employment Jun 2013 Q1/2013 Jun 2013 Q1/2013 Jun 2013 Q1/2013 Jun 2013 Q1/2013 Nokia, Global Microsoft, Global Nokia, Finland Microsoft, Finland NSN: 50,476 NSN: 50,476 Other: 37,295 5,295 99,139 131,139 NSN: 5,800 NSN: 5,800 Other: 5,100 400 300 5,000 32,000
  • 11. -10 0 10 20 30 40 Aug 30 = 100 Sep 5 close Aug 30 = 100 Daily close prices at Nasdaq (MS) & NYSE Sep 5 Close +41% Nokia -6.5% Microsoft Stock market reaction Nokia gets out of its cash crisis & is left with a solid network eq. business Microsoft positions itself to burn cash in an effort to make its ecosystem fly
  • 12. Why? Nokia • Cash crisis • Windows ecosystem not gaining ground – No improvement in the short or medium term • No ability to jump the MS ship? Microsoft • Mimicing Apple & Google • Windows ecosystem not gaining ground – HW-SW integration – Avoid double margins in Windows phones – All-in cash burning • Nokia made >80% of Windows phones & was at a fire sale price
  • 13. Viable next steps • Microsoft might – Sell Nokia factories (18,000 employees) – Leverage licensed Nokia brand in urging feature phone users to Windows – Discontinue headquarter functions & feature phone development in Finland – Retain 80-90% of its Finnish employment – Replace Ballmer with Elop • Nokia might – Concentrate primarily to network eq. & services – License/sell IPRs (w. reduced focus on related R&D) – Narrower focus in location-based services – Be engaged in further M&A action
  • 14. Ultimate outcomes? • Microsoft: Renewed hope for the ecosystem but slim chances of success • Nokia: Nicely pooring business after a rocky ride • Industry: None? • Finland: Mentally a shock, but economically neutral? • Conspiracy theory: After exiting Windows & filling its coffers, Nokia re-enters phohe business
  • 15. Thank You! fi.linkedin.com/in/petrirouvinen/ Petri.Rouvinen@ETLA.fi  +358–50–3673474