1. MICROSOFT NOKIA ACQUISITION
( A MARRIAGE MADE IN HELL)
Presented by
Mr. Manish Tripathi ( I – 15-18-19)
Thakur Institute of Management Studies
&
Research
(Sunday, 25 February 2018)
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2. ABOUT MICROSOFT
• Microsoft Corporation is an American
multinational technology company with
headquarters in Redmond, Washington
• It develops, manufactures, licenses, supports and
sells computer software, consumer electronics,
personal computers, and services
• Its best known software products are the
Microsoft Windows line of operating systems, the
Microsoft Office suite, and the Internet Explorer
browsers
• Founded April 4, 1975; 42 years ago in
Albuquerque, New Mexico, U.S.
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3. ABOUT MICROSOFT
• Founders: Bill Gates & Paul Allen
• Satya Nadella (CEO)
• Bill Gates (Technical advisor)
• Number of employees: 124,000 (2016)
• Revenue US$89.95 billion (2017)
• Operating income US$22.27 billion (2017)
• Net income US$21.20 billion (2017)
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5. ABOUT NOKIA
• Nokia is a Finnish multinational communications,
information technology and consumer electronics
company
• Founded in 1865 , 152 years ago
• Headquarters Helsinki
• It was founded as a pulp mill company and had long
been associated with rubber and cables
• Since the 1990s focuses on large-scale
telecommunications infrastructures and technology
development
• A notable major contributor to the mobile telephony
industry, having assisted in the development of the
GSM, 3G and LTE standards (and currently in 5G), and
is best known for having been the largest worldwide
vendor of mobile phones and smartphones for a
period
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6. ABOUT NOKIA
• Revenue : €23.147 billion (2017)
• Operating income: €16 million (2017)
• Net income: –€1.437 billion (2017)
• Number of employees: 102,761 (2017)
• The company is viewed with national pride by
Finns, as its successful mobile phone business
made it by far the largest worldwide company and
brand from Finland
• At its peak in 2000, during the telecoms bubble,
Nokia alone accounted for 4% of the country's
GDP, 21% of total exports and 70% of the Helsinki
Stock Exchange market capital 6
8. MICROSOFT ACQUISITION OF NOKIA
• NOKIA had established a long-term partnership
with Microsoft to produce smartphones built off
its Windows Phone platform
• In September 2013 Microsoft purchased NOKIA
mobile hardware division for $7.2B
• However, Nokia will continue to create cellular
networking equipment, build maps and location-
based services, and create other technology
outside of the mobile devices unit
• As part of the deal 32,000 Nokia staff joined
Microsoft
• 12,500 employees at Nokia Made redundant
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9. 9
Steve Ballmer and Stephen Elop together state: “With the
commitment and resources of Microsoft to take Nokia’s devices
and services forward, we can now realize the full potential of
the Windows ecosystem, providing the most compelling
experiences for people at home, at work, and everywhere in
between …We will continue to build the mobile phones you’ve
come to love, while investing in the future – new phones and
services that combine the best of Microsoft and the best of
Nokia.”
10. WHY MICROSOFT ACQUIRED NOKIA?
• To establish a viable presence in the mobile space
• Microsoft acquires Nokia’s patents, IP licenses, and
Nokia HERE mapping technology
• Decreased transaction and unit costs combined with a
larger global distribution and supply chain should
prove profitable for Microsoft
• Vertical Integration: With the unification of Nokia and
Microsoft, Microsoft acquires the supply chain and
manufacturing production of Nokia and its array of
mobile devices
• Unit Costs: With its acquisition, Microsoft controls all
modes of production. As transaction costs are sure to
decrease, so will unit costs.
• To integrate with its Windows OS and provide unified
communication
• Unifying hardware and software
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11. POST-ACQUISITION SCENARIO
• July 2015: Microsoft writes off $7.6B, admits
failure of Nokia acquisition
• Microsoft announced it would lay off about 7,800
employees, most of them working in its device
division, specifically the phone group
• Microsoft stock dropped by more than 5% in early
trading following the acquisition announcement
• Nokia investors, on the other hand, seemed to
cheer the deal, sending the stock up by more than
40%
• The write down pushed Microsoft's losses to $2.1
billion for July 2015 quarter
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13. NOKIA SOLD BACK TO HMD GLOBAL
• In May 2016, Microsoft sold Nokia branding rights
to HMD Global oy (Osakeyhtiö) for $350M
• HMD Global oy is a Finnish company incorporated
on 1 December 2016 run by 500+ former Nokia
employees
• Post closure of this deal, some 4,500 employees
will move to join HMD Global
• The manufacturing, distribution and sales arms of
Nokia have been bought by iPhone manufacturer
Foxconn
• Microsoft will continue to develop Windows 8
Mobile and support Lumia phones
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14. REASONS FOR FAILURE
• Microsoft was too late in mobile industry
• Developers don’t want to devote resources to a
platform without a significant user base, but
consumers don’t want to invest in devices until
they can offer a minimum threshold of popular
applications. Apple iOS and Google Android was
developers choice
• Microsoft did not license is mobile OS Windows 8
to mobile phone vendors
• Microsoft could not match the Apple iOS based
mobile phone in style and quality
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15. REASONS FOR FAILURE
• Microsoft wanted to enter emerging markets
where Nokia had strong presence and sell
Windows based phones, however device makers
like Xiomi, Huawei, etc. sold cheap android based
phones
• Mobile phone carriers like Verizon, AT&T Sprint,
etc. did not bring bundled offers
• Google’s Android was the cost leader and Apple’s
iPhone was first to market and the quality leader.
Microsoft failed to compete on either price or
quality.
• Change in CEO to Satya Nadella who has a
different strategy that Microsoft should not be a
mobile phone manufacturer 15
18. 18
"We are moving from a strategy to grow a
standalone phone business to a strategy to
grow and create a vibrant Windows ecosystem
including our first-party device family, and
bringing users into the Microsoft cloud no
matter the platform they are using."
19. BEST PRACTICES FOR ACQUISITION
• Over communicate all aspects of the merger or
acquisition with employees
• Establish integration task groups made up of key
individuals from each of the combining
organizations
• When restaffing, evaluate and then select the best
candidates for new positions
• Begin planning integration immediately, even
before due diligence has begun
• Retain the services of a consulting firm with a well-
established background in mergers and
acquisitions
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20. BEST PRACTICES FOR ACQUISITION
• Do not sacrifice core business or customer service
during transition
• Design the features of the merger or acquisition
process with the cultures of the participating
organizations in mind
• Identify each organization’s best practices
• Be certain to conduct “external” benchmarking of
competitors and non-competitors, alike, to
enhance your own best practices
• Ensure that communication efforts support
unification and alignment of the two cultures
• As far as possible, retain the CEO of acquiring and
acquired entity, at least for first few years
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