MICROSOFT'S ACQUISITION OF NOKIA'S DEVICES AND SERVICES UNIT: THE END OF THE OLD MOBILE ERA

Eventually, Microsoft announced its decision to acquire Nokia's devices and services unit for € 5,4 billion.

After all these years of speculation, now was the time to invest. Indeed, despite the collapse of the Nokia handset empire, Nokia still has numerous assets: a wide portfolio of patents, Nokia’s product engineering and global capabilities in manufacturing, marketing, and distributing mobile phones. Microsoft is thus not only acquiring the Lumia brand but also the Asha one – bearing in mind Nokia still sold close to 54 million devices in Q2 2013.   

Nokia will now focus on its three core technologies: the network infrastructure with NSN, its maps and location-based service ecosystem with HERE, and Advanced Technologies. There were early signs of the new approach when, a year ago, Nokia started to build brand equity beyond mobile phones with HERE (see my take on this blog at that time) but also more recently when Nokia announced its decision to acquire Siemens’ take to fully own NSN. Microsoft will pay Nokia a four-year license of the HERE services, bringing some regular revenues to the now much smaller company.

To avoid parts of the company to be acquired by some Far East Asian manufacturers and due to the diminishing investments from other Windows Phone licensees, Microsoft had to adopt a vertically integrated strategy. They are indeed the best placed to generate synergies with Nokia following the more than two years agreement. And as All Things Digital puts it, Stephen Elop is now the Microsoft CEO candidate to beat.

From a marketer’s perspective, does this mean Microsoft is now likely to confirm its position as the third mobile ecosystem? While Lumia sales have increased over the past few quarters, they remained small with only 7.4 million units sold in Q2 2013. Reaching your audience on Windows Phone 8 is still going to be a challenge for some time. As my colleague Charles Golvin summed it up very well in his blog post: Microsoft’s broader challenge is to “unite the myriad services and brands (Windows, Nokia, Live, Surface, Xbox, Bing, etc.) into a cohesive customer experience that will command and cement customer loyalty.”

Nokia's acquisition symbolizes the end of the old mobile era. Remember the days when Nokia was by far the leading handset manufacturer, with 40% market share in several European countries? When hardware was everything? These days are gone, and now most of the mobile innovation is coming from outside Europe: think US (e.g., Apple, Facebook, Amazon, Microsoft..) but also increasingly Asia and emerging countries. It is time for Europe to wake up.

In a recent report, I highlighted Nokia and BlackBerry as example of companies -- in the consumer electronics space itself -- that failed to understand the shift to touchscreen devices and tablets, saying they're so far behind the market that the likelihood of their ever catching up is incredibly small. My point was that marketers who do not try to close the gap between their own technology marketing choices and new consumer mobile usages will be forced to stick with outmoded computing form factors. The Nokia story highlights the need to consider mobile as the catalyst for broader technology and marketing changes. Marketers who are not ready to move away from a traditional marketing approach to develop new experiences for the most complex platform today will be lost in a world where computing will be disconnected from screens and where connected objects and wearables create the Internet of Things.