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Business News/ Opinion / Online Views/  With Nokia in hand, can Microsoft bridge the smartphone gap?
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With Nokia in hand, can Microsoft bridge the smartphone gap?

Move to buy Nokia’s devices business is in keeping with Microsoft’s 11 July announcement of ‘One Microsoft’

With the combined Lumia and Nokia range of phones, Microsoft hopes to make up for lost time in the devices space, and also gain a stronger presence in the enterprise segment, which may help it to oust Blackberry devices. Photo: Chris Ratcliffe/Bloomberg (Chris Ratcliffe/Bloomberg)Premium
With the combined Lumia and Nokia range of phones, Microsoft hopes to make up for lost time in the devices space, and also gain a stronger presence in the enterprise segment, which may help it to oust Blackberry devices. Photo: Chris Ratcliffe/Bloomberg
(Chris Ratcliffe/Bloomberg)

Mumbai: A decade ago, Nokia’s leadership position in India and globally was almost unassailable. Then, first Apple Inc., followed by South Korean handset maker Samsung Electronics Co. (riding on the success of Google Inc.’s Android-based phones) severely dented the Finnish company’s fortunes.

Nokia was toppled from its numero uno ranking by Samsung in April 2012.

Now the Finnish handset maker Nokia Oyj has called it quits and announced the sale of its entire devices and services business to Microsoft Corp. for around $7.2 billion—lower than the $8.5 billion that Microsoft paid for internet telephony service, Skype, and a snip compared to the $12.5 billion that Google Inc. paid to buy Motorola’s mobility business.

Subject to the usual regulatory issues, Microsoft is acquiring over 8,500 design patents, ownership of the Lumia and Asha brands, and a 10-year licence to use the Nokia brand on feature phones.

Microsoft has not purchased Nokia Siemens Networks (NSN), though.

Nokia’s portfolio, according to a presentation made by Microsoft on 2 September, includes around 30,000 utility patents and patent applications.

Nokia has steadily been losing steam both globally and in India—in spite of the fact that the Indian mobile handset market posted a 14.7% rise in value terms to 35,946 crore in 2012-13 compared to 31,330 crore a year ago, mainly because more and more Indians were buying smartphones, according to the 18th annual survey ‘Voice & Data 100’ report, released on 20 August.

The report showed that Samsung had dethroned Nokia to become No 1 in India.

Samsung ended the year with revenue of 11,328 crore compared to 7,891 crore a year earlier, a growth of 43.6%. The company also became the market leader with a 31.5% market share.

Nokia dropped a rank in the Voice & Data survey with a 27.2% market share and 18% drop in revenue. In the year ended 31 March, Nokia’s revenue from its Indian operations was pegged at 9,780 crore compared to 11,925 crore in 2011-12. Nokia’s slide began when the company failed to sense the need for a dual-SIM phone for the Indian consumer—something that had been introduced by Indian companies years ahead of global players like Nokia.

Nokia’s Lumia series phones that attracted huge global sales in the initial phase could not draw much attention in India. The rise of smaller local brands such as Micromax, Karbon, Lava, and Zen showed that consumers wanted—and continue to want—cheaper, feature-rich phones, the report said.

Homegrown handset company Micromax took third position with a 8.7% share followed by Karbonn Mobiles with a 6.4% share. Apple Inc. has a 3.6% market share in India with the smallest number of handset models in its portfolio.

Globally, last September, in its bid to fight the dominance of Apple Inc.’s iPhone and Android-based phones from companies such as Samsung in the rapidly-growing smartphone segment, Nokia and Microsoft jointly announced the launch of Nokia 920 and 820.

“The next generation smartphone, based on the Windows Phone 8 platform—the result of a 18-month partnership", was how the two companies described it.

The Lumia 920 included navigation tools such as Nokia Maps, Nokia Drive and Nokia Transport and an app called “City Lens" that allows users to point the smartphone’s camera at any nearby landmark or business to view an overlay that includes information about the location.

Beyond smartphones, Nokia consistently spoke about connecting the next billion people with models such as the Asha series introduced in countries like India, dual-sim devices, and low-priced feature-rich phones.

Nokia even had smartphones, based on the Symbian S60 platform, which also supported third-party apps, long before 2007, the year Apple launched the first iPhone.

Nokia launched Ovi Store for apps in June 2007, a whole year before iTunes app store’s launch.

But back then, the company’s app developer community, for the most part, was unstructured and the distribution of apps was highly fragmented.

Nokia partnered with Intel in early 2010 to start working on Meego and Qt SDK —a cross-platform application and UI (user interface) framework. In February, 2011, it abandoned Meego (close to its launch date), and spoke of moving away from Symbian phones, and of adopting the Windows Phone (with the first device launched in October 2010).

While Nokia was busy developing Windows-based phones, sales of its Symbian devices started plummeting, affecting its share in the smartphone market. Adopting any new platform, especially a smartphone operating system (OS), is a 15-18-month development cycle.

Simulataneously, the Android ecosystem and Samsung were growing rapidly (along with iOS, Apple’s operating system for the iPhone) and retail consumers and carriers around the world had more options.

Nokia was pinning its hopes too on PureView, which boasts a 41 megapixel (MP) camera, expecting to target users with augmented reality (AR) technology that would allow them to get additional data on hotels, monuments and other points of interest by simply aiming the camera at such locations. But that did not happen.

The deal done and dusted, what’s in it for Microsoft?

Besides grabbing a bargain, the move to buy Nokia’s devices and services business is in keeping with Microsoft’s 11 July announcement of ‘One Microsoft’—“a far-reaching realignment of the company that will enable us to innovate with greater speed, efficiency and capability in a fast changing world".

“Going forward, our strategy will focus on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most."

Microsoft spoke about how “all units of the company will share and contribute to the success of core offerings, like Windows, Windows Phone, Xbox, Surface, Office 365 and our EA offer, Bing, Skype, Dynamics, Azure and our servers".

Microsoft’s Windows-powered Nokia-Lumia phones have been making steady progress globally, but not at the pace that the company would have liked.

Besides, the Lumia range is present in only the higher-end smartphone segment. With the combined Lumia and Nokia range of phones, Microsoft hopes to make up for lost time in the devices space, and also gain a stronger presence in the enterprise segment, which may help it to oust Blackberry devices.

Smartphones have become crucial for handset makers and mobile operating system vendors—a fact borne out by patent battles between Apple and Samsung. Having slugged it out since April 2011, Apple is desperate to keep Samsung at bay while showing rivals it will brook no copying in the smartphone and tablet world.

Its competitors are retaliating, too. Nokia filed a suit against Apple in 2009 for patent infringement, Apple filed one against HTC in 2010; Microsoft chased Google’s partners offering Android-powered products, and Google-owned Motorola Mobility has a patent case pending against Apple.

Nokia’s patents will only strengthen Microsoft’s case in patent battles.

By 2016, smartphones will account for more than two-thirds of mobile phone shipments, according to research firm IHS Inc.. The most basic phones will account for just 4% of the market by then, with feature phones representing 28% of shipments.

According to research firm International Data Corp. (IDC), Samsung maintained its leadership spot in the three months ended 30 June in the Indian smartphone segment, with a 26% share boosted by cash-backs and zero percent interest Equated Monthly Installment (EMI) schemes. Micromax stayed steady at No. 2 and crossed the 2 million units mark in shipments with a 22% share.

Smartphone shipments from Karbonn also grew steadily over the last quarter, and the brand now has a 13% share. With Nokia’s decision to dump its Symbian devices, the focus has moved to the Lumia range of smartphones, and the Finnish handset maker has a 5% share—the same as Sony.

The deal between Microsoft and Nokia is expected to close in the March quarter of 2014. Indians will wait and see how Microsoft handles the Asha series.

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Published: 03 Sep 2013, 01:49 PM IST
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