An announcement was made late Monday concerning Nokia, one of the leading makers of Smartphone’s, and Microsoft. In a $7.2 billion deal Microsoft acquired Nokia Corp’s entire line-up of Smartphone’s as well as an impressive portfolio of patents and serves. The move is clearly an attempt to gain market share in the hugely profitable smartphone industry, which they have been struggling in for years. In a battle to compete with the two main smartphone giants, Apple and Google (Android), Apple needed to do something drastic, and it seems this is it.
The deal will also be a significant step for Microsoft to further diversify their business. What was once a nearly exclusively software company, focused on operating systems, Microsoft is now in the smartphone hardware business, as well as the Windows 8 mobile to power the phones.
This may be a big move for Microsoft to stay competitive. The company many people fear was going to become less relevant over the next several years due to the shrinking PC and Laptop market. They have been attempting to get into the smartphone and tablet market for some time, with little success. It seems they have now bought their way in, which is a nice advantage of having the deep pockets of Microsoft.
The specifics of the deal include the price of $5 Billion for the Nokia unit which makes the Smartphone’s, including the Nokia Lumia which already runs the Windows 8 software. Another $2.2 billion is for a 10-year license to use the Nokia patents, as well as an option to extend the use of those patents indefinitely after the initial ten year period is up.
Microsoft is paying for this purchase using a portion of the nearly $70 billion they have held in overseas accounts as of June 30th.
