Microsoft Explains The Rationale Behind Its Nokia Purchase


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By now, it's no secret that Microsoft is purchasing Nokia's Devices and Services business. With the purchase, Microsoft will integrate Nokia's hardware business into its own to help push Windows Phone 8 forward. The market isn't being too kind on the news this morning, but Microsoft assures its investors that the purchase will benefit them in the end.

As part of Steve Ballmer's email to Microsoft employees this morning, he shared a slideshow that details his company's rationale for purchasing Nokia's Devices and Services business. The rationale is split into four areas - accelerate phone share, strengthen overall opportunity, smart acquisition and strong execution plan.

Starting with the first - accelerate phone share - Microsoft says that its Nokia partnership on the Lumia line of Windows Phones has already seen massive success. Since Q3 2012, the number of Windows Phone units shipped has steadily increased each quarter with over 7 million Nokia Windows Phones being shipped in Q2 2013. Microsoft also notes that it has more than 10 percent of the marketshare in nine markets, and is outselling Blackberry in 34 markets.

The second - strengthen overall opportunity - is all about using Windows Phone to improve the health of the entire Windows ecosystem. Microsoft believes that the traditional role of Windows in enterprise software will help elevate Windows Phone into the workplace as well as the home through what it calls the "consumerization of IT" through programs like BYOD. Furthermore, it believes that increased smartphone sales will lead to increased tablet sales and increased tablet sales will lead to increased PC sales.

Interestingly enough, Microsoft notes in this section that it needs to create viable alternatives to services offered by Apple and Google. Microsoft's current spat with Google over YouTube on Windows Phone is already well known, but it sounds like Microsoft wants to recreate every Google and Apple service for Windows Phone. The more cynical among us will note that Microsoft just wants users to remain in their world, but the company notes that it needs "a first-rate Microsoft phone experience for its users." Creating its own apps will hopefully accomplish just that.

The third - smart acquisition - assures investors that the purchase of Nokia's Devices and Services business was a sound decision. The company notes that the purchase used offshore cash so as not to have any impact on investors. It also notes its Windows Phone business will break even through services once it's able to sell through 50 million devices, and the Nokia purchase will help them reach this threshold faster.

The fourth and final - strong execution plan - is pretty much a repeat of the organizational email Ballmer sent this morning. It notes that Nokia will continue operating as it has been with minimal interference coming from the merger. The Nokia executive team will join Microsoft, but actual phone development will continue unabated in Finland.

On a final note, Microsoft says that it will seek approval for its acquisition from all major international regulatory bodies. If everything goes smoothly, it expects approval by early 2014. By that point, most of the integration should be complete and Microsoft may even have a new CEO.

[Image: Microsoft]