Microsoft buys Nokia’s Devices Division, including Manufacturing

So the big mobile enterprise news today, seen in this article from The Verge, is that Microsoft is buying Nokia’s devices division.

There are three interesting points to this purchase.

They’re not buying Nokia outright—Nokia is keeping its HERE mapping division, among others—but they are buying the device division, including manufacturing. This is similar to how Blackberry worked, but is in stark contrast to Apple, which has essentially no manufacturing component. Even with the stated move of manufacturing of Apple’s pro desktops to the United States, that manufacturing will be outsourced to Taiwanese or Chinese companies.

So apparently Microsoft thinks a manufacturing arm will bolster its chances of success. Perhaps Microsoft is trying to emulate Samsung and Google, rather than Apple. Microsoft has manufacturing and licensed patents, much like Google acquired with its purchase of Motorola.

Another interesting point is the timing of the purchase. Anyone could have guessed that putting Stephen Elop in charge of Nokia several years ago was prepping him to rework Nokia as a leaner company and bring it into the Microsoft fold. We kept expecting it to happen, but it never did.

So now it happens—right after Steve Ballmer’s retirement from Microsoft is announced. One can only imagine that previous negotiations broke off when Stephen Elop wanted a bigger role and perhaps a clear line of succession to the top, and Ballmer balked at such a thing, since he wasn’t going to retire for another decade. Maybe Ballmer’s enforced retirement changed negotiations materially.

The third interesting point is the purchase of the low-end Asha line, but not the high-end Lumia line. According to The Verge’s article, Nokia has had profitability problems trying to win in the high-end market. So perhaps Microsoft is going downmarket with the Asha line. But Apple has already started its inevitable downmarket trend by coming out later this month with the rumored-and-all-but-inevitable iPhone 5C.

Apple took this same tack with their iPod line (Classic, touch, mini, nano, shuffle) and their iPad line (Retina and mini models)—it was inevitable with their iPhone line. Chances are, Apple will continue to go downmarket with future models, as long as they can figure out how to keep their margins high. And Samsung has dozens of models in every niche imaginable, so it’s hard to imagine how Microsoft can differentiate itself in the lower-priced market. Maybe Elop figured it out, and that’s the driving force of the acquisition.

These are exciting times in the enterprise mobile world. It’s good to see Microsoft making bolder moves than they have in the past.


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