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  5. > Nokia: Acquisition by Microsoft, and what next for Windows Phones?

Introduction

In September 2013, Finnish mobile phone manufacturer Nokia agreed to sell its mobile handset arm to technology giant Microsoft in a deal worth EUR5.4bn (approximately $7bn). The move represents a new phase in Microsoft’s plan for Windows phones and the company’s modernization attempts.

Features and benefits

* Analysis of US Technology giant Microsoft's decision to acquire Finnish Nokia's mobile devices business following years of poor performance.
* Evaluates why Nokia fell, what Microsoft plans to do, and the consequences of the merger.

Highlights

Nokia was once the envy of the telecoms industry, earning more than 50% of all the profits in the mobile-phone industry in 2007, when the company was at its zenith. Within six years, Nokia is struggling. Whilst still one of the largest mobile phone companies in terms of handset sales, it has fallen behind in the smartphone era.
Microsoft has suffered similar problems to Nokia making a series of blunders in its attempts to take advantage of the growing mobile devices market. By acquiring Nokia, it now has a direct smartphone manufacturer which can be used to compete.
The move has attracted considerable infighting within Microsoft and also may prove a dud. Nokia managed to produce critically acclaimed phones, but could not translate this into successful sales. Windows phones would need to significantly improve their sales to break even by the target of 2016.

Your key questions answered

* How did Nokia fall behind in the smartphone era?
* Why has Microsoft decided to acquire Nokia?
* Will Microsoft's strategy succeed?

Table Of Contents

Nokia: Acquisition by Microsoft, and what next for Windows Phones?
O VERVIEW
Catalyst
Summary
A BRIEF HISTORY OF NOKIA'S RISE AND DECLINE
The current state of the mobile phones market
Nokia's recent performance
Nokia's failure in the smartphone market
2007-2010: Nokia and Symbian's loss at Android's gain
Windows app store restrictions
WHY MICROSOFT ACQUIRED NOKIA
Microsoft's transition to device and services
Microsoft is still unsuccessful in mobile device technology
Surface tablet fails to sell and Windows Phone's limited sales
Microsoft emulates Apple's tactics: OEM sidelined
Vertical integration will improve profit margins and the product
Nokia will assist tablet manufacturing too
Windows Phone's advantages over Android
POTENTIAL PITFALLS FOR WINDOWS PHONES
Windows Phones still trails the incumbents considerably
Branding problems?
Windows 7 incompatibility with Windows 8
The problem of Windows phone being a small player in a large market
Alienating Microsoft's current clientele
Forcing consolidation in Windows smartphones
Tablet production and computing OEMs
Microsoft's basic handset problem
Nokia in India
CONCLUSIONS
Vertical integration was necessary, but the future is uncertain
APPENDIX
Definitions
Sources
Further Reading
Ask the analyst
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