Microsoft to buy Nokia mobile business for $7 billion, is it the end of Asha?

Microsoft Corp. and Nokia Corp. just entered an agreement whereby Microsoft will be acquiring Nokia’s Device & Services business, license Nokia’s patents, and license and use of Nokia’s mapping services. The acquisition is expected to cost Microsoft $7 billion and will close on the first quarter of 2014 pending the approval of Nokia’s shareholders and other conditions.

Microsoft-Nokia

The acquisition is an apparent acknowledgement that the once leader in mobile devices, Nokia, is still in a deteriorating position unable to catch up with Apple and Samsung despite its exclusive partnership with Microsoft which started in 2011. Nokia said this deal will improve its financial position and provide a solid basis for future investments in its continuing businesses.

According to the terms of agreement, Microsoft will also acquire all of Nokia’s Mobile Phones and Smart Devices business units as well as their design team, operations, sales and marketing, and related support functions. That’s approximately 32,000 people who are expected to transfer to Microsoft. The software giant will also get Nokia’s Lumia brand and long-term patent licensing agreement with Qualcomm.

Nokia, on the other hand, will be focusing now on enabling mobility through its leadership in networking, mapping and location, and advanced technologies.

Microsoft expects the deal to accelerate the growth of its mobile market share and will build on the partnership it has with Nokia.

What’s unknown here is the future of the Asha, or Nokia’s feature phones. Will Microsoft continue development on the Asha platform or just focus on Windows Phone devices? It’s a big question considering Nokia managed to sell 54 million feature phone units in Q2 of this year alone. Will Microsoft continue to battle with Apple and Samsung in the smartphone segment? Or use its massive cashflow to rule the feature phone market?

[Microsoft, Nokia]


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