Microsoft Buys Nokia's Handset BusinessAssociation of Business Training
September 4, 2013 — 856 views
After dominating the market for almost two decades with regard to sales of mobile phones, Nokia has finally given in due to its poor performance in 2012, with losses reaching $4 billion, by agreeing to the sale of the business to US Software giant, Microsoft. The cost of the acquisition is agreed to be €4.4 billion Euros ($7.2 billion) for the Finnish mobile telephone company. One of the main reasons why Nokia had agreed to the acquisition is due to the massive rise in its competitors which mainly include Apple and Samsung.
The CEO of Microsoft believes that the acquiring Nokia will benefit Microsoft as he aims to build the company into a services and gadget company like Apple. The acquisition of the company has not reflected well on the shares of Microsoft as it showed a 6% drop which took a $15 billion chunk of their market value. This is due to the protestation from the investors against the acquisition of the marginalized and under-performing mobile company.
The Future of Microsoft's Latest Acquisition
The CEO of Nokia, Stephen Elop, who oversaw Microsoft's business software division before leaving in 2010, will come back to the US company and head the new mobile device business. As the current CEO of Microsoft, Steve Ballmer, has announced his retirement from the US software company before the year end, it looks like the board of directors are looking at one of the potential heirs to Ballmer.
One of the reasons for Elop's nomination is that he is one of the few people who can actually take over Microsoft's empire. The Finnish media has not taken the acquisition too well as they have labeled Elop as a 'Trojan Horse' who handed over one of the last few European technology giants for such a low price. The Finnish corporation had a valuation of close $200 billion over a decade ago.
Financial Predictions for the Acquisition
As Microsoft is already gaining a lot from the Windows Operating System, Xbox gaming console and Office Suite, it has not seen any inquiry to the mobile device business which shows huge profits, until now. The company aims to make a profit in excess of $40 per smartphone that it sells once the acquisition is completed. This is $30 more per smartphone that Microsoft is currently making as it incurs huge marketing and developmental costs that it pays to Nokia.