1. Microsoft-Nokia
Acquisition Strategy
Group 5:
Jessica Borjas, Lauren Cool, Lili Lui, Daniel O’Keefe & Warren Van Name

2. Agenda
• Nokia-Smartphones
• Microsoft & Windows
Phone
• Acquisition-Rational
and Strategies
• Q&A

3. • 1964: Developed VHF radio
• 1984: Launched one of the first mass produced car phones
• 1987: Introduced one of the world's first handheld mobile phones
• 1997: Developed the first smart phone OS “Symbian” in a joint
venture with Motorola and Ericsson
• 2003: First to introduce phones designed to incorporate games
• 2007: First phones that had offered music downloads to compete
with iTunes
• 2007: First phone to offer satellite navigation
• 2008: Competed with Blackberry by offering a full QWERTY
keyboard
Innovators

4. 2007
• Symbian OS had a 63% market share of smartphones
• RIM and Microsoft had about 10% market share each
• Nokia’s stock price of $40.00
2008-2010
• Major players were ignored as they entered the market
• iOS and Android both were introduced and ignored, quickly
eroding Symbian’s market share by roughly half
2013
• Market share of smartphones had fallen to 0.3%
• Revenues from mobile phones were down 40%
• Stock price fell to$7.95.
Market Share

5. Unbalanced
Innovation Portfolio
2006-2010
Aggressively acquired technology corporations in order to expand product offerings
Social
Networking
Web
Browser
Online
Advertising
Media
Sharing
Music
Downloads
Digital
Mapping
Digital
Address book
Mobile
Messaging
• The technology was untested
• No advanced planning to incorporate into its mobile phone services
• Nokia’s phones were specialized for a particular audience, yet new technologies
incorporated differed among its product offerings – no increase in value

6. Loss of Focus
2008
• Shifted its focus from the mobile phone and communications industry to the
Internet
• They recognized Apple, Google, and Microsoft as major players but not as direct
competitors
2009
• Apple introduced the iPhone G3, securing 14.4% of the smartphone market
2010
• Google’s Android operating system was incorporated by Sony and Samsung who
had previously licensed Nokia’s Symbian OS.
• Symbian’s market share dipped 50% while the Android OS increased 27%.
2011
• Entered a strategic alliance with Microsoft focusing on the Window’s Phone 7
• Stock price immediately dropped 4%
• Nokia smartphones sales dipped to 4.6 million Euro compared to 30 million in
2010

7. 2002
• Entered the smart phone market in 2002 with the release
of Pocket PC 2000.
• Recognized early on the future of smartphone technology
• Integrated its successful PC Windows OS into the mobile
phone market
2003-2012
• Development of the Windows Mobile OS
• Integrated the Windows 8 OS, to become a truly cross
platform OS (phone, tablet, and PC)
OS Development

8. Market Share
2004
• Held 11% of the US smartphone market
2007
• US smartphone market share grew to 42% & global share of
12%
2011
• US market share decreased as low as 1.3% with the release
of Windows Phone 7
• Global market share declined in parallel to 2.4%
• Decrease in market share mirrored that of Nokia due to the
success of iOS and Android operating systems
2013
• Acquires Nokia’s mobile phone business aiming sights high

10. The Deal
• Purchase price of 3.9 bn Euros
• Obtain licensing rights of Nokia’s utility patents for 10 years at
an additional 1.65 bn Euros
• Nokia signs a non-compete agreement through December
2015 in which it cannot produce mobile devices under its own
name
• Nokia welcomes the acquisition stating that it will allow the
company to focus on its NSN business and increase its
profitability

11. Value-Diversification
Economies of Scope-Patents:
• 8,500 design patents as well as licensing rights to 30,000 utility patents
• Own HERE, a mapping application that will give consumers an effective
alternative to Google Maps
• Combine Nokia’s licenses with its own patent agreements expanding its coverage
to Samsung without additional payments
• Realize royalty revenue from 60 patents that are currently licensed to IBM,
Motorola Mobility, and Motorola solutions
• Securing patents relieves some uncertainty with mobile phone shipments
• Eliminates licensing agreement currently held with Nokia

12. Value-Diversification
Market Power-Vertical integration:
• First party devices, by the acquisition of device design and engineering, will
put Microsoft in a position of optimizing mobile devices to match its Windows
8 OS
• Accelerate innovation in the areas of imaging, interactive entertainment,
information capture, and connectivity ensuring Windows Phone presence
• Microsoft will gain a globally scaled supply chain specific to the mobile device
market including established device distribution and sales networks.
• Microsoft will inherit tested operational processes and systems required for
the production of mobile devices.

13. Speed to Market
Rationale:
 Nokia produces 200M mobile phones per year
 Existing licensing agreements with Microsoft, with several devices specifically
designed to run the Windows 7 and 8
 Has combined worldwide mobile phone share of 15%, allowing for rapid
expansion in key growth markets
 Microsoft’s believes that the key to increasing its tablet sales is to rapidly
increase its OS use on smartphones. The acquisition of Nokia makes this
possible

14. Synergy
Smart Acquisition:
• Microsoft and Nokia are highly complementary in nature
• Existing relationship and agreements create value that Microsoft could not
acquire on its own or through acquisition of another company
• The acquisition is relatively friendly in nature, with Microsoft maintaining
Nokia’s operational procedures as well as leaving its sales team intact
• Microsoft is keeping key Nokia executives to oversee supply chain
consolidation, phone device R&D, marketing, and consolidation

15. CONCLUSION-OPINION
Microsoft’s move seems logical however, growth in market
share may be limited due to the following factors:
 Microsoft may likely become too large and suffer from
excessive diversification. Managing different fields, which
require exclusive interest will be challenging
 The acquisition will shift resources from its core
competency of software and gaming development
 Microsoft’s debt load will increase after the acquisition

16. CONCLUSION-OPINION
 The smartphone industry is currently saturated in
established markets with Android holding an 80% share.
It will be difficult for Microsoft to convince consumers in
these markets to switch
 Windows 8 is generally disliked, with many of its PC users
refusing to upgrade from Windows 7. This consumer
group is key in order for success in the mobile device
market
 When Nokia announced it was entering into a strategic
alliance with Microsoft the stock price dropped by 4%.
This can be viewed as an indicator of stockholder faith in
the value of Microsoft’s OS
continued

17. Q&A