Cookie consent

We use cookies to improve your experience on this website. By continuing to browse our site you agree to our use of cookies. Tell me more | Cookie preferences

Microsoft's deal with Nokia: Cheap bet or looming disaster?

What will Microsoft do with Nokia?

    Just Watched

    What will Microsoft do with Nokia?

What will Microsoft do with Nokia? 03:31

Story highlights

  • What does Microsoft see in Nokia, a business whose share of the smartphone handset market is sliding?
  • The answers to this question vary, Jim Boulden writes. But there is potential for this to be a win for both
  • Microsoft will need to figure out a way to tap the cheaper smartphone market
  • It will need to do this while also ensuring the two companies are merged -- not an easy task

It's easy to ask why Microsoft would want to buy Nokia when its share of the smartphone handset market is sliding. What can Microsoft possibly do to reverse Nokia's fading fortunes?

The emails from analysts pouring into my inbox are evenly split -- great idea or a disaster; relatively cheap bet by Microsoft (at $7 billion) or a share price-eroding move.

Read more: Why deal is good for both

So, can Microsoft leverage its monopoly selling software and services contracts to corporations, and get a slice of the employees' mobile business? Or, by getting a product which it is already in partnership with, is Microsoft simply buying the cow when it's already getting the milk?

Watch more: Microsoft's deal with Nokia

The deal comes as no surprise. When Stephen Elop left Microsoft more than two years ago to become Nokia's first non-Finnish CEO, it seemed logical the two companies would eventually meld.

One question rightly being asked, is whether rival handset makers or operators will simply stop making phones with Microsoft's mobile operating system.

In my view, it doesn't matter. Nokia and Microsoft joined ranks two years ago and the others were a fraction of Microsoft's fraction of the mobile operating market.

Read more: Is one mobile enough?

The question in my mind, is whether Microsoft can take its mobile operating system and make it a player in the burgeoning market of cheap smartphones.

Who will replace Ballmer at Microsoft?

    Just Watched

    Who will replace Ballmer at Microsoft?

Who will replace Ballmer at Microsoft? 01:47
PLAY VIDEO

Nokia still makes more handsets than any other manufacturer, and now that's Microsoft's business. Nokia's market share was 23.4% in the last quarter of 2012, according to research firm Gartner. That's because Nokia sells an enormous number of cheaper mobiles in emerging markets.

Microsoft to buy Nokia's phone business

    Just Watched

    Microsoft to buy Nokia's phone business

Microsoft to buy Nokia's phone business 03:21
PLAY VIDEO

Microsoft's task, then, is to stuff a cheaper version of its smartphone OS into these more affordable phones. The sales channel is there. The brand name of Nokia is known the world over. Microsoft is an expert at sales and marketing.

The bigger task may be to integrate more than 30,000 employees into the Microsoft ecosystem. Many companies gamble that a bolt-on acquisition is the sure-fire solution to a missing piece of the puzzle. But it can set a company up to fail.

A real competitor to Google-Android and the Apple iPhone could be around the corner. But it will be a huge task for Steve Ballmer's successor.

      CNN Business

    • An Iraqi worker adjusts a control valve at the Daura oil refinery on November 5, 2009 in Baghdad, Iraq. Iraq and a grouping of U.S and European oil companies Exxon Mobil Corp and Royal Dutch Shell PLC signed a $50 billion contract today to develop the West Qurna oilfield, two days after the Iraqi South Oil Company signed a technical service contract with Britain's BP and China's CNPC to develop the Rumaila oilfield. The Iraqi government is trying to attract foreign investment, especially in the oil sector, in hopes of reviving its war-torn economy. Iraq has the third largest oil reserve in the world but it is producing way below its potential. (Photo by Muhannad Fala'ah/Getty Images)

      Airstrikes, rebels seizing control of oil fields, plus a severe refugee crisis are a recipe for market panic. So why are Iraq oil prices stable?
    • A view of gloves and boots used by medical staff, drying in the sun, at a center for victims of the Ebola virus in Guekedou, on April 1, 2014. The viral haemorrhagic fever epidemic raging in Guinea is caused by several viruses which have similar symptoms -- the deadliest and most feared of which is Ebola. AFP PHOTO / SEYLLOU (Photo credit should read SEYLLOU/AFP/Getty Images)

      The biggest Ebola outbreak in history is taking its toll in Western Africa, hitting some of West Africa's most vulnerable economies.
    • People enter a casino in Las Vegas, Nevada, on April 18, 2009. Las Vegas is the most populus city in the US state of Nevada and internationally renowned major resort city for gambling, shopping, fine dining and entertainment. Las Vegas which bills itself as the �Entertainment Capital of the World� is famous for the number of casino resorts and associated entertainment. AFP PHOTO/Jewel SAMAD (Photo credit should read JEWEL SAMAD/AFP/Getty Images)

      Macau has overtaken Switzerland in the wealth stakes, being named the world's fourth richest territory by the World Bank.
    • spc marketplace middle east ata atmar a_00010015.jpg

      Saudi Arabian Bateel brand is best known for its delectable dates but it now has more than a dozen cafes and a new bakery in the works.
    • Vantablack designed by Surrey NanoSystems absorbs 99.96% of all light. It however will not be the solution to the creating the world's ultimate slimming black dress! A dress made out of this material would render the curves and contours of the human body invisible and would leave the wearer looking like 'two dimensional cardboard cut-out.'

      A British nanotech company has created what it says is the world's darkest material. It is so dark the human eye can't discern its shape and form.
    • Jibo robot is designed to be an organizer, educator and assist family members. CNN's Maggie Lake met him and says she was impressed with his skills.
    • A picture taken on March 15, 2014 shows children playing at the sprawling desert Zaatari refugee camp in northern Jordan near the border with Syria which provides shelter to around 100,000 Syrian refugees. Syrian refugees in the seven-square-kilometre (2.8-square-mile) Zaatari camp in Jordan fear that President Bashar al-Assad's likely re-election this year will leave their dream of a return home as distant as ever. The brutal war in Syria between the regime and its foes shows no sign of abating and has killed at least 146,000 people since it erupted in mid-March 2011. And 2.5 million Syrians have fled abroad and another 6.5 million have been internally displaced. Jordan is home to more than 500,000 of the refugees.

      Sandwiched in between Iraq and Syria, Jordan's destiny seems to be one of a constant struggle for survival. John Defterios explains.
    • SHEFFIELD, ENGLAND - NOVEMBER 18: Queen Elizabeth II wears 3 D glasses to watch a display and pilot a JCB digger, during a visit to the University of Sheffield Advanced Manufacturing Research centre, on November 18, 2010 in Sheffield, England. (Photo by John Giles - WPA Pool/Getty Images)

      At the last football World Cup, it was all about 3D. This time around, it's nothing less than 4K.
    • An Iraqi worker adjusts a control valve at the Daura oil refinery on November 5, 2009 in Baghdad, Iraq. Iraq and a grouping of U.S and European oil companies Exxon Mobil Corp and Royal Dutch Shell PLC signed a $50 billion contract today to develop the West Qurna oilfield, two days after the Iraqi South Oil Company signed a technical service contract with Britain's BP and China's CNPC to develop the Rumaila oilfield. The Iraqi government is trying to attract foreign investment, especially in the oil sector, in hopes of reviving its war-torn economy. Iraq has the third largest oil reserve in the world but it is producing way below its potential. (Photo by Muhannad Fala'ah/Getty Images)

      Iraq produces 3.3 million barrels per day and has the world's fourth-largest oil reserves. But the current crisis is putting all this in danger.
    • Valves of gas pipe-line are seen in the gas station not far from Kiev on March 4, 2014. The European Union will help Ukraine pay the $2.0 billion it owes to Russian gas giant Gazprom, a top official said Tuesday, as part of an aid package reportedly worth more than one billion euros. AFP PHOTO/ ANDREY SINITSIN (Photo credit should read ANDREY SINITSIN/AFP/Getty Images)

      The gas standoff between Russia and Ukraine could have a knock-on effect on Europe. Explore this map to find out why is the EU nervous.