Thoughts on Microsoft’s acquisition of Nokia

By Ashish Panjabi, Chief Operating Officer, Jacky’s Electronics LLC


Ashish Panjabi, COO of Jacky’s Electronics.
Ashish Panjabi, COO of Jacky’s Electronics.

With the flash announcement early this morning Dubai time (at night in the United States) that Microsoft is going to acquire Nokia’s handset and devices business, the question a lot in the industry have been asking themselves is if it is too little too late, it is at times easier to talk in hindsight.

In the case of this deal, there were a few things that struck out to me that I wanted to highlight as I’ve worked with Nokia for a number of years and have always had an interest in wanting to see the company do well.

Market Coverage
Nokia has got a very strong position in the UAE.  While the focus at the top end of the market may have moved towards what Apple and Samsung were doing, Nokia had been chipping away at certain core segments.  In fact a report from the Telecommunications Regulatory Authority (TRA) in the UAE from August 2013 showed that the top four devices registered on the mobile networks in the UAE came from Nokia.

This does include feature phones where Nokia is still quite strong.  The potential to gradually move this segment to low-end smartphones like the Nokia Asha series is something that Microsoft could capitalize on if they play their cards right.

Build Quality
Nokia devices have always been known for being amongst the best when it comes to build quality.  This is something Microsoft clearly wants to take advantage of as they’ve started rolling out their own hardware such as the Surface tablets.

Distribution Network

  1. Microsoft failed with the Microsoft Surface on various fronts.  Even though the announcement of the Surface was covered globally, the product reached very few corners of the world just because Microsoft didn’t have the right distribution network.  If they were to couple this together with Nokia’s global reach, the situation would’ve probably been quite different.  Instead of writing down USD 900 million as they did for Microsoft Surface stock, they would’ve probably been able to move the stock to parts of the world where the product may have been better accepted.
  2. If Microsoft expects to compete with Apple and Samsung, they need to have a wider distribution network.  Samsung is probably the leader in this industry but Nokia isn’t far behind.  By being able to leverage on this, you could see Microsoft potentially being able to launch products in 90 countries instead of the handful of countries they’re introducing the Xbox One in towards the end of this year.
  3. Wearable Tech – Microsoft wants to compete with Google and Apple.  Both of them do software and hardware.  Google is moving in the wearable technology market with Google Glass, Apple is rumoured to be launching a smart watch and Microsoft I’m assuming has something up their sleeves as well.  Whether independently or jointly, I assume both Nokia and Microsoft had been playing in their labs with wearable technology but combining this knowledge, together Nokia’s distribution network and build quality, could mean we see Microsoft as a force to reckon with.

Camera & Antenna
Nokia has been known to have one of the best cameras in the smartphone industry.  Whether it was the PureView 808 or the Lumia 1020, Nokia has shown they’ve got a leadership within the industry.  Nokia also has got equally strong capabilities in the antenna space and have always been regarded as one of the best when it comes to packing in antennas for different bands into a mobile device.  You can only imagine how many ways Microsoft could take advantage of this.

The Battle for Number 3
Microsoft has been long trying to establish themselves in the mind of consumers as the number three operating system.  This is a battle they’ve fought with BlackBerry and it is difficult to say clearly who is on top at this stage.  However, it is not only a battle operating systems at the number three slot but also that of the number three hardware manufacturer.

Apple and Samsung have a clear leadership position in the smartphone hardware space and gobble up most of the industry’s profits between them.  Nokia would want to cement themselves in number three but would have faced challenges from the likes of LG, Huawei, Lenovo, Sony, Motorola and a host of others who want to be number three.  By combining hardware and software, Microsoft can make a push to cement their stake as the number three player in both hardware and software.

Quick Integration
Mergers between big companies can often be slow and bureaucratic.  Microsoft is not known for being the quickest company and with their own restructuring recently announced, one would hope they would work to integrate Nokia quickly.  The advantage Nokia has got is that both Stephen Elop, the former Nokia CEO and Chris Webber, the head of Nokia’s Sales & Marketing activities are both ex-Microsoft men.

This could help in the sense that they know the culture of both companies quite well and could find a way to make sure Microsoft doesn’t drop the ball here.

Risk of Bureaucracy
There are a lot of advantages both companies would have in this merger but the risk is that they get stuck in bureaucratic processes.  I’ve known Nokia for a number of years and there are certain things they do very well.  I just hope those processes don’t get stuck into the bureaucracy that Microsoft is known for.  Samsung is extremely aggressive despite being a large company and Microsoft will have to model themselves on this model if they want to succeed.

Find a Design Guru FAST
One bit of news that slipped under the radar with the acquisition announcement was that Nokia’s design head, Marko Ahitsaari is leaving the company in November.  This is the equivalent of Apple losing Sir Jony Ives and while Nokia have said there is a replacement on board, he has to be as good if not better than Ahitsaari as he looked over all aspects of hardware design, software and packaging in Nokia.

Start Listening
I’ve met Stephen Elop on a few occasions and I’ve noticed he brought about one major change in Nokia in that he made them listen again.  Nokia’s circumstances were pressured when he took over and the company had little choice but to listen.

However I’ve seen companies to the position that Nokia is in that till today operate in a vacuum.  Many of these companies continue to be extremely arrogant and if Stephen Elop does become CEO of Microsoft, I hope he starts making them listen as well.  Consumers, enterprise customers, channel partners, the press and all the other stakeholders in Microsoft have got a lot to say about how Microsoft can improve and I hope this acquisition of Nokia brings about a change in Microsoft’s corporate culture as well.

If not Microsoft then someone else…
Had Microsoft not acquired Nokia, then it would’ve just been a matter of time that someone else could’ve potentially acquired Nokia.  Companies like LG, Lenovo and Huawei for example are keen to dig their teeth well into the smartphone business and organic growth alone isn’t the way forward.

Microsoft probably knew that if they didn’t make a move for Nokia, then it may have been acquired by someone else and most likely you’d see Nokia move to Android, killing any chances that Microsoft would’ve had to make Windows Phone 8 a contender in the smartphone business.

We will see a lot more in the next few months over how all this pans out.  What is for sure, most people like me have an emotional attachment to Nokia.  For many, it was the first mobile phone they ever used and it was a loyal companion in the years before smartphones emerged.  Nokia has a legacy and has got the trust of most consumers.  I just hope Microsoft appreciates this, works to maintain this and keeps the Nokia flag flying high.