Microsoft Acquisition Of Nokia Essay

Name:

Institution:

Instructor:

Course:

Date:

In September 2013, Microsoft acquired Nokia at a cost of $7 billion in a bid to strengthen its (Microsoft) position as one of the leading players in the mobile universe. This is strategic rationale in response to the fierce competition in the industry. Microsoft desires to enhance its market competitiveness. Before the partnership with Nokia, Microsoft was virtually irrelevant in the mobile market but its acquisition of Nokia has enabled the company make inroads in the lucrative smartphone industry. Nokia smartphones run on Microsoft’s Windows Phone 8 operating system. Sale of Nokia smartphones has gradually increased and Microsoft would benefit from the positive indicator if it had direct control of Nokia resources. Microsoft aspires to leapfrog iOS in the next 3 years and this would be possible if Nokia was acquired by a competitor. Indeed, if Nokia was acquired by a rival, Microsoft would have been kicked out of the smartphone industry.

Already, the acquisition has proved fruitful with Nokia smartphones controlling an over 10 percent market share in 9 markets and outperforming Blackberry in 34 markets to become the third most popular OS in the world. Window-powered Nokia phones year on year sales have gone up by 78 percent. With all operations under one roof, innovation will hasten. The acquisition has increased the economies of scale that has led to the improved unit economics increasing profitability. The acquisition has also increased royalty gross margin from less that $10 to more than $40. The company will break even when smartphone sales will be above 50 million. The acquisition has integrated key Nokia personnel into its management team that has maintained the working