Microsoft takes over Nokia’s Cell Phone Business in $ 7 Billion: what will be the effect on Microsoft’s shares and revenues?

Microsoft Corporation has entered into a $7 Billion agreement with Nokia purchasing its cell phones and devices business.

microsoft-takes-over-nokias-cell-phone-business-in-7-billion-what-will-be-the-effect-on-microsofts-shares-and-revenuesThe deal which will meet its completion by the end of 2014’s first quarter was officially announced via a press release on 3rd September 2013. Under the terms that have been stipulated in the agreement, Microsoft will be paying out EUR 3.79 billion for acquiring almost all the services and devices business of Nokia, and around EUR 1.65 billion will be paid to license the company’s patents. This comes down to a total of $ 7 billion which is being anticipated to induce a new life into the Microsoft’s cell phone business.

Nokia has already been in a partnership with Microsoft as the company has been using the windows software for its growing Lumia smartphone series. Microsoft’s CEO Steve Ballmer said in an interview that bringing both the prolific teams together will surely cause to accelerate Microsoft’s profit and share in the smartphone industry through increased synergies, faster innovation and unified marketing and branding. Nokia which was once the leader of the industry has faced quite a down scroll with Samsung and Apple taking the larger market share.

They will be significantly benefited from this transaction and it will provide a solid platform for them for future business. Steve Ballmer and some analyst of the mobile phone industry have signified towards the fact that the innovation and the strength of Nokia is proven in mobile phones of all genres and prices, and they are also very efficient in critical areas like engineering and hardware design, manufacturing and supply chain management, marketing, distribution and hardware sales. This fact exemplifies that Microsoft can bank on a reliable and highly skilled team with its investment.

Steve Ballmer pointed towards the fact that many Key operatives and executives of Nokia are also joining Microsoft which will result in a swift and smooth transition causing an effective execution. While talking on the effects of the transaction on the shares of Microsoft, Mr. Ballmer said that the ongoing growth in shares, and the synergies that have developed across marketing, advertising and branding, will cause this acquisition to prove accretive towards the adjusted earnings/share of Microsoft starting from FY15.

He also said that this is a great opportunity for significant and a stable long term profits for our shareholders. With the android and iOS platform ruling the smart phone industry, many are of the belief that the acquisition will not prove worthwhile towards the revenues and shares of Microsoft unless Nokia hits the Android platform. They base this idea on the fact that more and more people are moving towards smartphones where android phones are their first choice.

Therefore the smartphone industry has the highest potential of revenues and with Nokia and Microsoft sticking with the Windows smartphone platform, they might not be able to meet the desired profits. However many still stress the fact that Nokia is still a charming choice in Non-smartphones that are used in many under developed and developing countries and this generates a significant portion of the revenue that Nokia generates. They are also of the view that with Microsoft permanently on board, one might see some new innovations and additions to Nokia’s smartphones and their applications which will result in boosting Microsoft’s revenues.

With the already established and growing android market and with the highly innovative and skilled teams of Nokia and Microsoft, there is fair chance that Microsoft might also hit the android platform with Nokia. Well the overall word in the market is that the acquisition can prove quite worthwhile for Microsoft in the long run if they adopt appropriate strategies and synchronize them with the market norms.


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