$7.2 billion purchase of Nokia’s devices business,paid for entirely out of Microsoft’s stockpile of offshore cash, is probably the no-brainer acquisition of the year.
In addition to shoring up Microsoft’s most important smartphone partner, it places into Microsoft’s hands two important technologies besides smartphones:
1. Nokia Here, a GPS mapping tech that came from Nokia’s $US8.1 billion purchase of Navteq in 2007. Navteq provides GPS apps to a lot of cars made by Volkswagen, Mercedes, Hyundai, and Toyota. Plus Navitek is used in all kinds of other devices, too.
Nokia didn’t just throw this tech to the agreement. Microsoft agreed to make extra payments over four years for it.
GPS devices collect location data. They know where all of the cars and devices are. Microsoft plans to use this data with Bing and make it available to software developers via its cloud service, Windows Azure.
Now add this into the rumoured investment Microsoft may make in Foursquare and you can see Microsoft’s plans shape up.
Microsoft “needs an effective alternative to Google,” it said in a PowerPoint presentation shared with Business Insider. There needs to be “more than one digital map of the world.”
Microsoft also sees this as a chance to bring GPS tech or data to other apps like Office, Skype and Xbox Live.
2. A massive collection of intellectual property from Nokia. Remember a big chunk of the money Microsoft is paying to Nokia is to licence Nokia’s patents for at least 10 years: That accounts for €1.65 billion or about $US2.2 billion of this $US7.2 billion agreement.
Microsoft is gaining access to over 30,000 patents from “one of the two most valuable portfolios” in the wireless industry, Microsoft says. The other important patent portfolio Microsoft refers to belongs to chip maker Qualcomm.
For instance, Motorola Mobility, now owned by Google, pays fees to Nokia to licence wireless patents. It will now have to pay those fees to Microsoft.
This is significant for Microsoft because a good chunk of its mobile revenue is actually coming from the patents it collects, mostly from Android device makers, instead of the phones it sells.
The more patents it owns, the more it can go after Android (and maybe Apple), and the more it makes from other companies’ smartphones.
None of this solves Microsoft’s ultimate problem: making consumers and businesses want Windows Phones. But it helps Microsoft generate more revenue from mobile while it tries to figure that out.
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