Microsoft's Nokia acquisition receives cautious welcome


Microsoft's acquisition of Nokia's phone business could be the final nail in the coffin for BlackBerry's comeback chances, according to industry watchers.

As reported by IT Pro earlier today, the software giant has agreed to cough up 4.6 billion for the Finnish phone company's struggling handset business, having partnered with the firm for several years.

Microsoft is now able to control the full user experience, which will help avoid OS fragmentation.

The mobile phone maker has seen its fortunes wane, as the popularity of the smartphone form factor popularised by the likes of Apple and Samsung has soared.

The company is still the world's second largest mobile phone maker, thanks in no small part to the enduring popularity of its feature phones.

However, despite partnering with Microsoft to bring its line of Windows Phones to market, the company has failed in recent years to secure a top five place in the highly lucrative smartphone market.

In light of this, it is perhaps unsurprising that news of the Redmond giant's intervention has been cautiously welcomed by market watchers.

Victor Basta, managing director of tech-focused financial advisory firm Magister Advisors, said reversing the "gradual erosion" of market share and perception Nokia has suffered over the years will be a tough job for Microsoft.

"Microsoft must be betting that with more control they will be able to reengineer the business and gain market share, [but] there is a huge array of challenges in the way," said Basta.

"The risk for Microsoft is that this deal is a 'me-too' strategy on the heels of Google's deal with Motorola and a fundamental recognition that Apple's content and hardware ecosystem is the only model that can work."

Basta said Microsoft's apparent attempt to "recreate Apple" by building a business that offers software and hardware under the same roof could also backfire.

"A me too' strategy, catching up with Apple is not likely to succeed. Microsoft needs its own strategy in the marketplace, and Nokia alone will not deliver that," he warned.

Adrian Drozd, research director of ICT Europe at business advisory firm Frost and Sullivan, said the deal should help improve the standing of the Windows Phone platform within the smartphone market.

"The acquisition enables Microsoft to re-double its efforts with Windows Phone, and use the Lumia brand to truly innovate with the platform," said Drozd.

"Microsoft is now able to control the full user experience, which will help avoid OS fragmentation (as has been the case with Android) and make it easier to attract developers to the platform," said Drozd.

The Nokia-Microsoft deal has been criticised in the past for scaring off OEMs that might be interested in building Windows Phones, but Drozd is hopeful this could now be reversed.

"In order to grow market share, Microsoft will need to keep Samsung and HTC on board, and will need to alleviate any concerns that emerge as a result of the acquisition," he explained.

"Microsoft can use Nokia to really drive innovation on the platform, as Google is doing with Motorola. However, in order to succeed it will need to ensure it maintains good relationships with its partners."

Meanwhile, Nigel Hawthorn, EMEA director for marketing at mobile device management vendor MobileIron, said it's BlackBerry who stands to lose the most from this deal going ahead.

"This year we've already seen Windows 8 overtake Blackberry in shipments, and with this announcement that position is further strengthened. As the mobile handset industry consolidates with Motorola acquired by Google and Nokia by Microsoft, this leaves BlackBerry as a small fish in a global pond," said Hawthorn.

"In the enterprise, BlackBerry's traditional stronghold, I've always believed there would be three main operating systems. Android and iOS rule right now, and just 12 months ago the battle was really on for that third spot. I think this news answers that question. For now."

Caroline Donnelly is the news and analysis editor of IT Pro and its sister site Cloud Pro, and covers general news, as well as the storage, security, public sector, cloud and Microsoft beats. Caroline has been a member of the IT Pro/Cloud Pro team since March 2012, and has previously worked as a reporter at several B2B publications, including UK channel magazine CRN, and as features writer for local weekly newspaper, The Slough and Windsor Observer. She studied Medical Biochemistry at the University of Leicester and completed a Postgraduate Diploma in Magazine Journalism at PMA Training in 2006.