Microsoft and Nokia made a nearly $7.2 billion deal in hopes of transforming Microsoft’s business for an era that is passing it by. Not only did Microsoft gain Nokia’s phones, they acquired the wealth of information held in the minds of their employees as well.
The former Microsoft exec, Stephen Elop, will rejoin Microsoft as part of the deal. He will now become a potential successor for Steven Ballmer who is planning to retire soon. Elop, before the deal, was the chief exec of Nokia. He is bringing along 32,000 of his employees to join the Microsoft team.
Negotiations for this deal were initiated by Ballmer who reached out to inquire whether or not Microsoft could be more than just a partner with Nokia. According to Ballmer, this agreement is a bold step for the future of Microsoft. He said he’s excited about the talent and experience that this will bring to the company.
There are many good reasons for expanding business by way of a merger or company acquisition:
- Added staff equals additional skills: Whenever a company acquisition includes employees those workers bring with them additional knowledge of the industry, variety of skill sets and business intelligence. It breeds a combination of brains, guts and heart.
- Additional funds or assets: The companies forge funding which allows for new development ventures and increased stock options. Merging with another company can make both more valuable and increase their financial strength. A successful company acquisition increases finances and reduces overhead while allowing the joint companies to attract more capital.
- Increased customer base: Each company has a certain customer base that will follow them wherever they go. An expanded customer base increases market shares. A merger allows for better pricing, innovative products, and an enhanced customer experience. A successful merger will create better opportunities to satisfy customers. A satisfied customer introduces new customers.
- Reduced competition: Even when companies are profitable there is always something missing or areas that could be strengthened. Often the missing pieces lie within their competition. A successful merger increases manufacturing innovations, design and development.
At one time Nokia was the strongest company in the mobile phone arena. Once the industry transitioned to the Smartphone era it quickly lost its strength. For a while, there had been speculation as to how long Nokia could last as an independent company; many of its fans have moved to Apple and Samsung products long ago.
Nokia is a Finland-based company which will allows Microsoft to use some of their foreign-held funds to pay for the deal; allowing them to avoid a large USA tax penalty. At this price, it was too good for Microsoft to pass on. They paid less than when they bought the communication service for Skype.
Interim chief executive, Risto Siilasmaa, said the megadeal offers opportunities for employees of Nokia. He said that selling a business is always an emotional process, but this was the only logical thing to do as part of the company’s evolution.
Prior to the Microsoft deal, Nokia was their closest associate in Smartphone business. This deal is an obvious acknowledgement that Microsoft needs a stronger force in the mobile phone industry. It also confirms that Nokia realized it was on a downward spiral and could not handle its competition alone.
With the new deal Microsoft will for the first time control software teams as well as Smartphone hardware. This is something that Apple has leveraged for years. This will allow Microsoft to have a better advantage when competing with the stronger companies.
Company acquisition can prove to be a faster, cheaper, and generally more efficient growth method for any size business. The key is finding the right company to merge with and it seems that Microsoft has done that by acquiring Nokia.
By: Cherese Jackson (Virginia)