WITH the $7.2 billion Nokia acquisition, Microsoft becomes a player in making smartphones.
The Finns are sore about this. Nokia is Finland’s flagship company. In 2010 Stephen Elop, a Canadian, left Microsoft to become the first foreign chief executive of Nokia. Now he’s headed back to Microsoft with a shot at becoming CEO and taking half of Nokia with him.
That is the sort of thing that happens when a company falls behind. In 2007 Nokia had 40 percent of the world market in handsets. That share has slipped to 15 percent, and in the next-generation product, smartphones, it has only 3 percent. Without a new owner, it could be the end of the road for Nokia’s phone business. With a new owner comes cash, talent and another chance.
It just won’t be a Finnish chance.
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Microsoft needs to take some chances. It is sitting on a $77 billion cash mountain, the legacy of a near-monopoly in PC-operating systems. Self-respect forbids it to pay it all out as dividends, which would be an admission of impotence. Also, some of the company’s billions are overseas, outside the firing range of the U.S. corporate-income tax.
It has an incentive to invest abroad, as it already did in buying Skype.
Microsoft’s move also pre-empts a Chinese telecom company, Huawei Technologies. In June, when Microsoft was in acquisition talks with Nokia, Huawei expressed an interest in Nokia — but not in Nokia’s commitment to Windows Phone.
Microsoft’s acquisition buys a lease on life for Windows Phone. Google and Apple have 90 percent of the smartphone operating-system business — this time around. But in technology, change is the one constant. Any strong player can win the next round, provided it stays in the game.
In any scenario, the shopper with the most choices wins.