A year after the $7.2 billion acquisition of Nokia’s mobile phone manufacturing business, which did not produce the expected results, Microsoft Corporation remains unfazed, and is now looking at a similar deal with Blackberry Limited. It was a much publicized marriage of two giants, who chose to join hands to conquer the smartphone market which has been recording tremendous growth in recent years. However, the deal which was finalized in April 2014 between Microsoft Corporation and Nokia has not proved to be a highly rewarding one as expected by market analysts and industry experts.
After Microsoft gained control of the technological know-how of Lumia smartphones, the range along with Windows phones has faed similar roadblocks in the highly competitive smartphone arena. However, Microsoft is not giving up on the deal yet. The software giant has pinned its hopes now on its next and final operating system Windows 10. The OS is expected to give the company’s phone business a major boost as it is expected to be a platform which can be run on a host of devices. Users would be able to easily switch between smartphones, PCs, and tablets in this environment.
Microsoft CEO, Satya Nadella, has said that there is still a lot of work which is ongoing in their smartphone business. He said that before Windows 10 is released worldwide, the device-related costs will have to be further reduced. Nadella also shared that the number of Lumia devices sold after coming under Microsoft is substantially higher compared to the same quarter last year. It has been reported that Nadella was never in favor of the Nokia deal which was finalized by Steve Ballmer, his predecessor. However, he is now behind the deal, and working towards making this huge acquisition a success.
The few key goals are to strengthen Microsoft’s position in the smartphone and mobile operating system market, along with giving major players like Samsung, Google, and Apple a real tough competition. The market situation at this point of time suggests that Windows Phones are unpopular among most developers, the Mobile OS is not being backed by a large number of manufacturers, and the company is not selling enough number of devices. Microsoft Corporation still looks unfazed after the mediocre Nokia deal, and its attempts of a similar acquisition of Blackberry Limited could be a strategy for providing Windows 10 as a service, instead of merely an operating system.
The fact is that Blackberry Limited is unable to grow, and has reached a saturation point. Though, it is growing in developing markets like India, the company is not in a good shape globally. Reportedly, a complete buyout or acquisition of Blackberry Limited is being considered by Silicon Valley giants like Microsoft Corporation as well as Apple Inc. The stock prices of Blackberry Limited experienced a minor bump after rumors came in that Apple Inc CEO, Tim Cook, was looking to purchase the Canadian phone maker. Other reports suggest that Microsoft is by far the frontrunner in the acquisition of Blackberry Limited, as it has signaled intent to purchase by bringing in investment banks to monitor the situation and the deal.
The acquisition of Blackberry Limited could benefit Microsoft Corporation in more ways than one. The company’s reputation of providing solid hardware, and its enterprise security software might bring in business customers. Its BBM messaging service may give access to its social world which is enterprise-facing. The market value of Blackberry Limited right now is $5.55 billion. Microsoft Corporation is expected to offer a deal of close to $7 billion, but it may not offer a premium in merger negotiations.
Microsoft recently tried to purchase salesforce.com with an offer of $55 billion. The deal did not go through due to a demand of $70 billion made by salesforce executives. A similar pricing issue could jeopardize the deal with the board members of Blackberry Limited expecting a better offer. The developments will be interesting as Microsoft Corporation still looks unfazed after the mediocre Nokia deal, and is presently looking at a similar acquisition of Blackberry Limited.
By Ankur Sinha
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