Microsoft's Acquisition of Nokia: Will the Gamble Work?

Microsoft's Acquisition of Nokia: Will the Gamble Work?
Case Code: BSTR455
Case Length: 21 Pages
Period: 2011 - 2013
Pub Date: 2014
Teaching Note: Not Available		 Price: Rs.500
Organization: Microsoft Corp., Nokia Corporation
Industry: Smartphones
Countries: Global
Themes: Acquisition
Microsoft's Acquisition of Nokia: Will the Gamble Work?
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

In September 2013, US-based computing major, Microsoft Corp. (Microsoft) and Finland-based communications company, Nokia Corporation (Nokia), announced that both the companies would enter into a transaction where Microsoft would acquire Nokia's Devices & Services segment, license Nokia's patents and license and use Nokia's mapping services, for US$ 7.2 billion.

Earlier in February 2011, Nokia had entered into a strategic alliance with Microsoft in a bid to combine the traditional strengths of the two companies to create synergies. With the acquisition of Nokia, Microsoft aimed to build on its partnership with the former by accelerating the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.

Under the deal, by acquiring Nokia's Devices & Services segment, Microsoft aimed to have a stronger foothold in the hardware devices segment. The software giant would license Nokia's patents and mapping services. For Nokia, the acquisition was expected to significantly increase its earnings, strengthen the company's financial position, and provide a basis for investing in future businesses.

Analysts felt that the Microsoft's acquisition of Nokia was a good move as the former lacked a successful product in the fastest growing mobile phone segment. Industry watchers noted that the deal was a bid by Microsoft to gain ground against Apple Inc., and Google Inc., in the intensely competitive smartphone market. According to analysts, the deal would make Microsoft a hardware software services player and be in a better position to compete with global as well as local rivals. For Nokia, the deal was a good move since Nokia's devices business was experiencing a steep decline with the takeoff of Apple's iPhone and Google's Android, analysts felt.

Issues

The case is structured to achieve the following teaching objectives:

  • Understand the role of acquisition as a growth strategy
  • Analyze acquisition as a strategy to face competition
  • Examine the rationale behind the acquisition

Contents

Keywords

Microsoft, Nokia, Acquisition, Strategic alliance Smartphone market, Google, Apple, iPhone, Samsung, Windows Phone OS, Android Patent, Licensing, Brand equity, Emerging Markets

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