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Microsoft’s Acquisition of
Nokia’s Phone Business
marks “the failure of
both companies”
International Herald Tribune, 4 Se...
1998:
Gates in
talks w. Nokia Jan 2013:
MS-Nokia
talks
2006:
Nokia & Siemens
merge network
businesses
2008/9:
Google
Andro...
Preceding rocky rides of
Microsoft & Nokia
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012
Source: Gartner.
Market Shares of Mobile Smartphone O...
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sources: Business Insider, Gartner, IDC, Strategic Analytics, company filings
...
-10
0
10
20
30
40
50
2008 2009 2010 2011 2012 2013
Source: Company releases.
Operating Profit Margins, %
Nokia
Samsung
App...
-10
90
190
290
390
490
590
690
2007 2008 2009 2010 2011 2012 2013
Source: Company releases. End of the year except for 201...
MS-Nokia
Deal
Microsoft pays
$5bn for Nokia’s devices unit &
$2.18bn to license IPRs Nokia retains
Rougly what Microsoft paid for Skype ...
Employment
Jun 2013 Q1/2013
Jun 2013 Q1/2013
Jun 2013 Q1/2013
Jun 2013 Q1/2013
Nokia, Global Microsoft, Global
Nokia, Finl...
-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...
Why?
Nokia
• Cash crisis
• Windows ecosystem not
gaining ground
– No improvement in the
short or medium term
• No ability ...
Viable next steps
• Microsoft might
– Sell Nokia factories (18,000 employees)
– Leverage licensed Nokia brand in
urging fe...
Ultimate outcomes?
• Microsoft: Renewed hope for the ecosystem
but slim chances of success
• Nokia: Nicely pooring busines...
Thank
You!
fi.linkedin.com/in/petrirouvinen/
Petri.Rouvinen@ETLA.fi
 +358–50–3673474
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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

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

  1. 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. 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. 3. Preceding rocky rides of Microsoft & Nokia
  4. 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. 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. 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. 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. 8. MS-Nokia Deal
  9. 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. 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. 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. 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. 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. 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. 15. Thank You! fi.linkedin.com/in/petrirouvinen/ Petri.Rouvinen@ETLA.fi  +358–50–3673474
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