A marriage of necessity

Updated - November 16, 2021 09:18 pm IST

Published - September 09, 2013 02:15 am IST

The seeds of >Microsoft’s recent acquisition of Nokia ’s mobile phone business were probably sown two years ago when the Finnish handset maker jumped aboard the Microsoft train by adopting Windows Mobile as the operating system for its smartphones. Analysts were quibbling even then over whether it was in Nokia’s best interest to do so. It is clear now, however, that the $7.2 billion deal is a marriage born out of necessity; both companies are one-time pioneers that are fighting a losing battle to maintain, let alone grow, their market share in the all-important smartphone market. Yet, it needs to be pointed out that even with the respective combined hardware and software capabilities of the two companies, the deal faces an uncertain future. Between the two, however, Nokia is likely to benefit far more in the long term as the acquisition is in effect a bailout package. Nokia’s liabilities are now Microsoft’s headache. Canadian-born Stephen Elop was appointed, with much fanfare, as the first foreign CEO of Nokia in 2010.Three years later, he’s headed back to Microsoft with half of Nokia in hand and a clear shot at succeeding Microsoft CEO Steve Ballmer.

However, this is the sort of wheeling and dealing one would expect when a company falls to ruin. Nokia’s share in the handset market has slipped considerably over the past ten years and in the smartphone market, it is in the single digits. At least part of this is due to Nokia’s slow adoption of innovations like the touch-screen. With a fresh infusion of cash and a renewed vision, it is altogether possible that Nokia’s handset business, now under Microsoft’s care, has a shot at reliving its glory days. Microsoft, on the other hand, could do with some risk-taking. The company, which is sitting on a cash mountain in the range of $70 billion, a remnant of its monopoly-driven software days, has struggled to make the transition into the smartphone age. Even with Nokia in hand, Microsoft is treading uncertain waters as it leaps forward without a proven strategy; a risk that seems all the more deadly in light of its poor management succession plan. Its next steps as it looks to take on Apple and Google are bound to have repercussions in India. After all, one of Nokia’s largest plants is in Chennai and if Microsoft chooses to exit the feature handset business, it will have a negative effect on its India employee base and consequent investment. While the deal is a bittersweet ending for Nokia, Microsoft still has a chance at the smartphone crown. After all, the only constant in the world of technology is that landscapes change at the speed of a mouse click.

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