Microsoft to buy Nokia’s smartphone biz: Rumor

Industry insider Eldar Murtazin is at it again! After being the first one to claim Nokia will abandon Symbian for Windows Phone even before CEO Stephen Elop’s famous ‘burning platform’ memo, Murtazin is now claiming he has details about Nokia and Microsoft working out a deal for the latter to take over Nokia’s smartphone biz. Murtazin is claiming Elop, Steve Ballmer, Andy Lees and Kai Ostamo will meet in Las Vegas to finalize agreement over Nokia’s smartphone division. He says the transfer could take place in the second half of 2012 itself and could include Microsoft also acquiring a couple of manufacturing facilities. Nokia will be left to produce its feature phones and Microsoft won’t use Nokia’s branding on these smartphones. The interesting bit in his revelations is that he claims the ball is now in Microsoft’s court, which would indicate that Nokia’s board has given a go ahead to the plan. Microsoft is currently evaluating whether it needs to acquire Nokia’s R&D and manufacturing facilities, though it certainly wants Nokia’s patents.

There are also rumors that Nokia will hire a new Chairman, Risto Sillasmaa, whose main function would be to finalize this deal set forward by Elop, who will then leave Nokia (and join Microsoft?). Sillasmaa will then hire a new CEO to look after whatever remains of Nokia. This is not the first time such rumors have emerged about Nokia and Microsoft and Nokia has denied them vehemently in the past. However, I think most of it makes sense now, especially after what we have seen about the performance of Nokia’s Lumia series of phones. Read on…

To set things straight at the outset, this would be a deal favorable to Microsoft. Its Windows Phone handset partners are not very enthusiastic about the platform and the consumer response too have been lukewarm. Even the new edition of Windows Phone 7.5 Mango Update hasn’t really gone ‘Gangbusters’ by any stretch of imagination. On the other hand, Apple’s iOS and Google’s Android are taking away whatever little market share other platforms – Symbian, BlackBerry and Windows Phone – have in the market. After Google’s acquisition of Motorola, Microsoft would realize the only way to ensure its share in the smartphone space would be to control the entire widget – hardware and software.

Its last attempt to do so with the acquisition of Danger and the Kin devices failed majorly due to the belief that these devices should not compete with Windows Phone. Otherwise, Microsoft has a great success story in the form of the Xbox franchisee, where it controls the entire widget. It cannot afford to lose out in the smartphone space and the only way to be there would be by acquiring Nokia’s smartphone division.

There is no way Nokia can come out of this deal as a winner. Whatever will be left in Nokia will make it a mass volume, low margin player. But with falling market share and poorer than expected response to its Lumia range of smartphone don’t leave them with many options. Cranking out smartphones is an expensive proposition and a string of failures will take Nokia down and affect even its successful feature phone/dumb phone business. At least Nokia will have its upcoming Meltemi OS for feature phones, which Nokia would hope will take on entry-level Android smartphones.

I think we will have a clearer picture by Nokia World this year, which usually takes place in September-October every year.