Tuesday, September 3, 2013

Nokia Makes The Deal With Microsoft: Patents Pending.

Microsoft made its inevitable announcement about Nokia's wireless devices and services businesses , but it was also wound up being a good deal for Nokia, which retains 50% of its pre-divestiture sales and adds a boat load of Microsoft's cash and access to cheap financing.

We were surprised by this part of Microsoft's announcement, namely
"Nokia will retain its patent portfolio and will grant Microsoft a 10-year license to its patents at the time of the closing. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services. In addition, Nokia will grant Microsoft an option to extend this mutual patent agreement in perpetuity.In addition, Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four-year license."
In the end, it may make no difference, given the option to extend the agreement; a purchase of the portfolio probably would have taken too much time for haggling about the valuation and it would have driven the price tag much higher. Microsoft's paying for the HERE product, a competitor of Google Maps,  with a four-year license, as opposed to a comparable ten-year license is interesting.

Steve Ballmer's letter to employees is really confusing for an outsider and reconfirms the point that the current Microsoft couldn't and shouldn't be the future Microsoft, if it is going to thrive.  Stephen Elop certainly moves higher in the next Microsoft CEO sweepstakes, and Julie Larson-Green moves off the list from reading the labyrinthine structure into which she falls after this acquisition.

The issue of Microsoft's other hardware partners being miffed by the acquisition seems off the mark.  Their relationship was always one of partner, not exclusive partner.  If Windows Phone has a 3% share of the mobile phone market, clearly Microsoft is commuting to make this bigger with the acquisition of Nokia's cellular assets.  Developing a proprietary mobile/table OS wouldn't seem like a good risk/reward proposition for HP. For Samsung, this is a different story, which probably is exactly what it needs to do over time. The unlocked Nokia 521 Windows Phone for T-Mobile certainly seems attractively priced for the features and is available at the new Windows Store; this could be the beginning of a more value-driven foray into the smartphone market. Let's see.

If Microsoft can organize the new mobile/wireless organization headed by Stephen Elop and reporting to Ballmer into a new kind of organization, i.e. working together as opposed to at cross purposes, this would be a step forward.

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