Microsoft has passed a major hurdle in its attempt to acquire the mobile phone business of Finnish company Nokia. Shareholders in Nokia voted to approve the sale, worth $7.2 billion (£4.5 billion) in a five hour long meeting. The sale, which was agreed in September, will now go to regulatory bodies for the final approval and should complete early next year.
Nokia, who at the peak of their success had a market value of $200 billion, have seen their mobile phone business turn from a profit making giant into a major loss making venture. With the rise of smartphones such as iPhone and Android, Nokia phones – mostly ‘feature’ rather than ‘smart’ phones – become increasingly unpopular, and despite many innovative moves – including a 41 megapixel camera on their Lumia 1020 – Nokia remains loss making today.
Things looked particularly bleak for the company a year ago when in October 2012 they announced their third quarter results. Nokia had sold just 2.9 million Lumia phones in the entire quarter, less than Apple managed in a single weekend during the same period. That quarter they made a €683m loss on their mobile phone business. However things have started recovering since then, and the latest set of results – for precisely a year after those particularly bad figures – show the loss has narrowed to just €91 million. This was in part because Lumia smartphone sales shot up to 8.8 million, giving them over a quarter as many sales as Apple’s iPhone in the same period
Microsoft’s long standing connection with Nokia, forged when Nokia gave up work on their own operating system and switched to Windows Phone, has meant that Microsoft knew that Lumia was becoming to look like a success. Keen to take over the brand and business before Nokia shareholders realised their fortunes were improving Microsoft offered to purchase Nokia’s mobile phone business in September.
While not all shareholders were convinced – and argued their side in a five hour meeting – ultimately the owners of a majority of shares decided it was time to sell up and focus on making money from Nokia’s other ventures. A relatively new venture for the company – patent litigation – is likely to fast become a major part of the groups profits. Nokia holds a vast patent portfolio from years of innovative developments, and has largely avoided litigation by coming to mutual licensing agreements with other handset makers. After the sale of the mobile phone business to Microsoft, Nokia will no longer have such an incentive and is likely to increase its litigation efforts. Already we’re seeing the opening shots against HTC, and Nokia have already called for an import ban of some HTC devices. If there’s one thing that should worry mobile phone consumers it’s that Nokia’s litigation might take great handsets by other manufacturers off the shelves until licensing deals are negotiated.
For those who like Windows Phone and are considering switching the deal between the companies is a sign that the platform is here to stay. With Microsoft controlling both the software and the main hardware manufacturer we’re likely to see more innovation as they try to compete with Android and iPhone, but still have the variety that comes from several manufacturers making devices for the platform.
