The Microsoft and Nokia deal took the Internet by surprise as analysts and other Internet pundits were puzzled about Microsoft's decision to buy Finland-based mobile phone manufacturer Nokia.
According to analysts, there were lots of details in the deal's structures that were baffling to many. Analysts question why Nokia was willing to license its brand instead of selling the entire thing since it has no consumer-focused business.
They also question Microsoft's willingness to enter the feature phone business and why it didn't buy the location platform, Here.
Microsoft has announced that it will continue to use the Nokia brand on low-end mobile phones or feature phones including the phones in Nokia's Asha range which are being sold for $99 or less before taxes.
The mobile industry knows that margins on feature phones are very thin. However, although feature phone sales have been declining as more people switch to smartphones around the world, the rest of the population cannot afford to buy a smartphone.
Worldwide smartphone sales may have caught up with its older and "dumb" cousins, Microsoft may have considered that there were still many consumers out there who want to buy new feature phones. In the second quarter of 2013, the number of feature phone units sold was 210 million.
Nokia's Asha phones have remained popular since they appear to be smartphones on the outside. Owners of these phones can use Google, Twitter and Facebook. For most people in the developing countries, these sites are already THE Internet.
The Microsoft-Nokia deal has stipulated that Microsoft can use the Nokia brand for the next 10 years on current mobile phone products. In a press release, Microsoft has said the deal will allow the company to extend its services to more people in emerging markets. Nokia's current phones will serve as an "on-ramp to Windows Phone."
The next Apple Inc?
When Stephen Elop moved from Microsoft to become CEO of Nokia, some analysts believed that he was a Trojan Horse and bring Nokia down so Microsoft would end up buying the company's mobile phone business.
When Microsoft announced the news of its plans to buy Nokia's phone division, Mr Elop was rumoured to be the next Microsoft CEO after Steve Balmer retires.
Microsoft's Nokia buyout was a more significant move as the company may have admitted its consumer business model may be broken.
Observers said Microsoft may be planning to be the next Apple Inc, the Cupertino-based tech company which has revolutionised the smartphone industry with the introduction of the iPhone. Microsoft wants to have a bigger slice of the pie in the mobile industry which seems to be a duopoly between Apple's iOS and Google's Android OS.
The company that Bill Gates started may be following in Apple Inc's footsteps. Apple is known for its vertical business model as the company created not only the hardware i.e. iPhones, iPads, Macbooks but also made its own software and services for its devices.
Microsoft's intention in buying Nokia's hardware business may just be its ticket to achieve an Apple-like success. The company may just be planning to sell hardware equipped with Windows OS and create its own app store just like Apple does now.
Considering Microsoft's track record with the Windows Phone, the big question now is, will Microsoft make this deal with Nokia work?
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