Microsoft and Nokia have finally stopped flirting underneath the table and made their relationship official. On February 11, 2011, Microsoft and Nokia announced a broad strategic partnership, through which Nokia would effectively serve as an extension of Microsoft’s Windows Phone division.
The partnership proved to be disastrous for Nokia. Its share of the smartphone market fell from 49.4 percent in 2007 to just 4.3 percent in 2012. The company’s shares lost roughly 51 percent of their value between the partnership’s announcement on February 11, 2011 and the market’s close on August 30, 2013. Nokia had, as PandoDaily contributor Farhad Manjoo noted last June, entered its death spiral.
It shouldn’t come as a surprise, then, that Microsoft today announced its intent to acquire Nokia’s devices and services business for $7.2 billion. (It will also license Nokia’s patents and mapping service.) There simply isn’t much of a Windows Phone market without Nokia-built smartphones; now that Microsoft is responsible for those products it’s able to exert further control over its mobile efforts.
By acquiring Nokia’s handset business, however, Microsoft has removed the only independent manufacturer truly committed to Windows Phone’s success. Companies like HTC and Samsung still produce Windows Phone devices, but their Android smartphones are much more popular and receive more attention than their Windows Phone counterparts.
Even the independent Nokia isn’t banking on Windows Phone’s success. The company’s alternate reality platform, Here, will not be sold to Microsoft, presumably because Nokia intends to release the service on other operating systems. (Here Maps is already available for iOS and Android.)
Microsoft stands to gain a lot by acquiring Nokia’s handset business. Thousands of engineers — and one prime candidate for Microsoft CEO Steve Ballmer’s replacement — will join the company. It will gain control of the most important aspect of the Windows Phone market that wasn’t created in its headquarters in Redmond. It no longer has to worry about what might happen if the single most popular Windows Phone device manufacturer decides to support another operating system.
But, at the same time, the acquisition shows just how barren the Windows Phone market truly is. It used to be Microsoft and Nokia leading the way — now it’s just Microsoft. Now the only question is if one company can compete against the variety of Android smartphone manufacturers, Google, and Apple.
[Image Credit: vernieman on Flickr]