Rumblings about a Microsoft-Nokia acquisition have been around for months. Microsoft made the news a reality Tuesday and announced a $ 7.2 billion deal for the company’s devices division. Talks between the two companies started as far back as February, but took off in earnest in July. According to the deal reached today, Microsoft is acquiring just the handset business from Nokia, as well as the “Lumia” and “Asha” brands. Nokia’s networking business, services business, and Here mapping teams will remain in Espoo under the Nokia brand.
In a letter to Microsoft employees, CEO Steve Ballmer said the move is “a bold step into the future.” It’s also the “next big phase of the transformation” the company announced in July. “We are very excited about the proposal to bring the best mobile device efforts of Microsoft and Nokia together,” continued Ballmer. “Our Windows Phone partnership over the past two and half years has yielded incredible work. Our partnership has also yielded incredible growth. In fact, Nokia Windows Phones are the fastest-growing phones in the smartphone market. Now is the time to build on this momentum and accelerate our share and profits in phones.”
All the rah-rah aside, it’s a move that makes sense from a number of angles. Consider Apple and BlackBerry.
Apple makes not only the platform for its smartphones, but also the devices. iOS and the iPhone are fully under Apple’s control. That means all the costs and all the profits are born and won by Apple. This strategy has worked well for Apple during the past six years. BlackBerry operates the same way, though its fortunes have headed south. BlackBerry makes both the operating system and the smartphones that run the OS. Though it stumbled (mostly due to bad leadership), its business model let it maintain control and own all the profits (when it actually made some).