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Microsoft - Nokia Deal

What does it mean for Microsoft?


How Soft Co. planned to generate profits from cellphone maker that was bleeding
money
Nokias bleeding money costs Microsoft 8 cents from EPS earnings per share first
quarter
Microsoft expects Nokia to break even by 2016.
Action Plan :
Devices would focus on high and low cost Windows smartphones
2 BU smart devices /mobile phones would become one, cutting overlap and overhead.
To Reduce engineering in Beijing & San Diego and unwind engineering in Oulu, Finland.
To Shift manufacturing to lower cost areas like Manaus, Brazil and Reynosa, Mexico;
and reduce manufacturing in Beijing and Dongguan, China.

Microsoft acquires Nokias phone Business


Microsoft acquired Nokias Qualcomm, other Key IP
licenses
Microsoft licenses Nokias patents for use across all
Microsoft products
Nokia retains NSN , HERE , its CTO office and its patent
portfolio

Microsoft leads the Computer Operating Systems Market with more than
90% of Market Share
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I

Overview of the Computer Market

Desktop Operating System Market Share

|2012; Market Share|

Windows

Mac OS

92,0%

6,8%

> There are only three players in the


computer operating systems market

1,1%

Linux

> Microsoft Windows is the


market leader with a gap of
more than 85% to Apple Mac
OS

Consulting Project | Microsoft reaping synergies from Nokia acquisition


Source: NetMarketShare Market Share Reports

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Nokia was the third worldwide top vendor of smartphones in the year of
2012 in a market where Samsung and Apple are the market leaders
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Overview of the Smartphone Market

Top Smartphone Vendors Worldwide

|2012; Market Share|

Samsung

30,3%

Apple

19,1%

Nokia

4,9%

HTC

4,6%

Others

> Almost half of the market is


concentrated in two players
with a combined market share
of 49,4%
> Altough Nokia is third in Market
Share there is a gap of 14,2% to
the second player
41,1%

Consulting Project | Microsoft reaping synergies from Nokia acquisition


Source: IDC Worldwide Mobile Phone Tracker

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Microsoft Windows Phone was the third Smartphone Operating System


in the market on being a recent business for Microsoft
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Overview of the Smartphone Market

Top Smartphone Operating System Worldwide


|1Q 2013; Market Share|

Android

75,0%

IOS

Windows Phone

Others

17,3%

3,2%

> The market is mostly controled


by two players with a combined
market share of 92,3%
> Microsoft Windows Phone is
third player in Operating System
with a gap of 14,1% to the
second player

4,5%

Consulting Project | Microsoft reaping synergies from Nokia acquisition


Source: IDC Worldwide Quarterly Mobile Phone Tracker

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Microsoft bought Nokia to Devices & Services business for EUR 5.44
billion all-cash transaction inserted in the new strategy
Nokia Acquisition

What the business includes

Human Resources transferral

Patents Included

Total
price

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Mobile Phones and Smart Devices business units as well as the design team, operations including
production facilities, sales and marketing activities and support functions

Approximately 32,000 people are expected to transfer to Microsoft at closing

10 year non-exclusive license to Nokia patents with reciprocal rights to utilize Microsoft patents in
Nokia HERE services. Option to extend the mutual agreement to perpetuity

purchase

The purchase price had two components: EUR 3.79 billion relates to the purchase of the Devices &
Services business and EUR 1.65 billion relates to the mutual patent license agreement and future
option

Consulting Project | Microsoft reaping synergies from Nokia acquisition


Source: Nokias announcement presentation

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II with Microsoft
Nokia Acquisition
also an integration of hardware knowledge and expertise
Companieswas
Backgrounds
I
software background

Specialized in Software Computer


Operating Systems

Specialized in Hardware
Mobile Phones and Smart devices

Worldwide Market Leader


computer operating systems
In 2012

Worldwide Market Leader


Mobile Phones
Until 2012

Software and Hardware background experiences together for a


more competitive Microsoft

Consulting Project | Microsoft reaping synergies from Nokia acquisition


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and challenges are based in the integration of all the new assets
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V

Opportunities
and
Challenges
Main opportunities
for
Microsoft
lead to an increase of competitiveness

Challenges

Opportunities

_
_

Wider range of products

Placement for Nokia employees

Increase the chance of Innovation


breakthrough

Integration between new teams


and associated costs from
managing all the process

Complementarity between
products

Competition
(Samsung, Apple and Google)

Increased costumer and company


benefits

Consulting Project | Microsoft reaping synergies from Nokia acquisition


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Nokia acquisition brings some Key capabilities to Microsoft and


empowers growth in potential markets
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V

Operational Synergies

Device
design and
engineering

Device
Distribution
and Sales

Globally
scaled
supply chain

Key
Capabilities

Mature
operational
processes
and systems

Operator
sales and
support

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Nokia acquisition will lead to several changes within Microsoft that


contribute as increased benefits for the company and costumers
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V

Key
Takeaways

Internal

External

Better Cost Structure

Costumer Oriented

Vertical integration between


Microsoft and Nokia structures

Costumers perception on Microsoft


with a full range from
entertainment to productivity

Increased
Benefits
Control Over Technology
Being able to develop both
hardware and software with
integrated innovation

Market Opportunities
Wider set of products,
allowing Microsoft to compete
for better market shares

Consulting Project | Microsoft reaping synergies from Nokia acquisition


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