Microsoft will acquire Nokia’s entire handset division for about $US7.2 billion.
The merger has been scoffed at by some analysts since it brings together Microsoft — a software giant that famously missed two mega-trends, the Internet and mobile — with a phone maker that greatly succeeded with feature phones but is still figuring out the smartphone market.
However, Nokia does have some momentum, at least outside of North America. Nokia has had success in promoting lower-priced smartphones that are part of its Lumia line. These have gained traction in emerging markets, likely because of the Nokia brand’s legacy in those regions.
In the second quarter of 2013, Nokia sold more Lumia smartphones globally than ever before at about 7.4 million units, which equates to 85% year-over-year growth.
Nokia is the only handset maker to rely exclusively on Microsoft’s Windows Phone 8 operating system to run its devices. Microsoft will be able to leverage Nokia’s global handset business to become a more device-centric company — and gain a toehold in emerging markets, which is where smartphone market growth is heading.
Also, Nokia will supposedly launch a new tablet at month’s end. Nokia’s tablet foray would give Microsoft another shot at this fast-growing hardware market, after the failure of the Microsoft Surface tablet.
One area where Microsoft will have to improve is Nokia’s standing in North America. Last quarter, North American Lumia sales were a paltry 500,000 units (most likely because higher-end Lumias haven’t sold well).
It will be an uphill climb. The dominance of Google’s Android and Apple’s iOS operating systems in North America mean that Windows-powered phones like the Lumia have been held to a minimal 3% market share.
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