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Microsoft's Nokia acquisition should have Apple and Google worried

Opinion The smartphone market just got serious
Tue Sep 03 2013, 10:35
Nokia Lumia 925 runs Microsoft's Windows Phone 8 operating system

MICROSOFT SURPRISED NO ONE on Tuesday when it announced that it picked up Nokia's devices unit and licensed some of its software for a cool £4.6bn in cash. While many see the deal as two struggling companies merging for a final shot at success, we think the deal should have Apple and Google worried.

First off, Nokia pretty much is Windows Phone. Ask somebody in the street to name a Windows Phone maker and they're unlikely to mention Samsung or HTC, with the Finnish phone firm accounting for around 85 percent of Windows Phone handsets sold and its Nokia Lumia 520 smartphone ranking as the best selling phone running the Microsoft mobile operating system yet. With Microsoft taking Nokia under its wing, it's hard to see Samsung, HTC or even Huawei or ZTE continuing to develop Windows Phone devices, despite Microsoft claiming that the deal will "help the market" for its other OEM partners.

This could be a worry for Google. When the firm bought handset maker Motorola last year, Google reassured Android OEMs that it would not favour the company in any way. However, after Microsoft's buyout of Nokia, perhaps other Windows Phone makers can't feel quite so assured.

So why is this bad for Google? Samsung and HTC are unlikely to want to rely on only the Android mobile operating system, and could avoid throwing all of their eggs into one basket by branching out elsewhere. This, for example, could see Samsung focusing more heavily on its Tizen mobile operating system and distancing itself from Android somewhat, which could spell bad news for the Android ecosystem, given that the firm accounts for 95 percent of profits in the Android smartphone market.

There have been some rumours recently that HTC could be planning to launch its own mobile operating system, and Microsoft's acquisition of Nokia devices could see the firm looking to focus on this to avoid reliance on Android.

That's not the only reason Google should be worried, and Apple should be too, as the buyout finally sees Windows Phone becoming an exciting third player in the smartphone market, looking to end the duopoly currently held by iOS and Android. The pairing of the two companies might be just what Microsoft's mobile operating system needs to extend its reach beyond the present 9.2 percent marketshare it holds in the UK. In fact, Microsoft has already said that it wants to see its market share triple by 2018 following its purchase of Nokia.

The deal sees Microsoft taking back control of the Windows Phone market, with Steve Ballmer already voicing that he wants to use the buyout to boost the number of big-name apps in the Windows Store, including apps like Instagram. Up until now, apps have been Windows Phone 8's main downfall. We've long praised the Windows Phone interface as one of the best on the mobile market and we've rarely had complaints relating to Nokia's hardware, so if Microsoft can stick to its promise here it could see Windows Phone getting a lot more competitive in the apps market.

In fact, we could go on. There are a number of factors that should have Google and Apple worried: Nokia bringing its distribution reach to Microsoft, the amount of money Microsoft can pump into Nokia, and the fact that Microsoft now owns Nokia's extensive patent portfolio, which could see Microsoft going after its rivals in other ways.

Today's deal also effectively writes off Blackberry as a major player in the smartphone market, as Microsoft picking up Nokia sees the firm combining the Finnish firm's hardware division with its software and is likely to make Microsoft the number one choice in the enterprise market.

Of course, we could also list many risks that both Microsoft and Nokia face, and Stephen Elop said on Tuesday that there is both "ambiguity and concern" among employees because neither firm knows what the future holds.

Done right, however, the future could present a shot at success in the mobile market for both companies. µ

 

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