Microsoft talks to purchase Nokia’s handset division reportedly falter

Alex Walls
June 20, 2013

Microsoft has reportedly been in “advanced talks” to buy Nokia’s handset division, but these have faltered.

The company’s talks with Nokia faltered over price and market worries, among other issues, according to people familiar with the matter, the Wall Street Journal said.

These sources said the talks had occurred this month but weren’t “likely to be revived”.

Nokia and Microsoft formed a partnership to load Microsoft’s mobile operating system, Windows Phone, onto Nokia’s smartphones, while Microsoft agreed to spend billions on marketing and engineering help, the Journal reported.

IDC recently found Windows Phone had crept past BlackBerry as the third most shipped mobile operating system, behind Android and Apple’s iOS, at  seven million units shipped in the first quarter of this year.  However this only gave the OS a 3.2 per cent market share, compared with Android’s whopping 75 per cent; and the Wall Street Journal reported sales for Windows Phone continued to struggle when competing with giants such as Samsung.

Why buy Nokia?

The Journal reported that it was not immediately evident why Microsoft would want to buy the handset division, given Nokia is the only manufacturer which makes Windows Phones exclusively and is essentially dependent on the Microsoft.

However Ovum senior analyst Nick Dillon said there had a been a trend of the larger mobile players moving towards a converged offering, where everything from the device to the mobile operating system to the applications, was offered from one entity, as with Apple and Google’s purchase of Motorola.

“The motivation…is primarily control over the entire consumer experience. So currently, although Nokia is very closely tied to Microsoft, it at the end of the day can’t tell it what to do, it is very reliant on the company to build devices and sell those and Microsoft can’t really dictate how it goes about that, absolutely.”

It was largely in Nokia’s hands as to what types of devices it made and how it marketed and sold them, he said.

Nokia would make the most obvious target for purchase should Microsoft want to take a larger degree of control over the ecosystem.  However the downside of handling the hardware and software was that Microsoft might lose the reach available from multiple vendors.

“If you’re relying on multiple vendors to sell hardware running your software then you’ve got a potentially wider number of outlets, wider reach over the market because you’ve got more of those companies doing your work for you, whereas if you move that in house, it’s up to you really to deliver on that.”

This wasn’t really a risk for Microsoft currently, he said,  because Nokia was the main manufacturer making Windows Phone devices; there were other licensees but with fairly insignificant volumes.

Nokia and Microsoft both said the companies did not comment on rumour or speculation.

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