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Tuesday, September 3, 2013

Why Microsoft Is Buying Nokia In $7 Billion Deal

Pictured is the Nokia Lumia 925, released in May 2013. (Nokia)

Pictured is the Nokia Lumia 925, released in May 2013. (Nokia)

Microsoft is buying Nokia’s smartphones, as well as a portfolio of patents and services, in a $7.2 billion deal announced late last night.

“Devices help services and services help devices,” is how outgoing Microsoft CEO Steve Ballmer put it — meaning of course, that Microsoft is taking on the Apple model of integrating software and hardware.

Google took the same step by acquiring the cell phone division of Motorola in 2011.

The deal shows Microsoft hopes to become a serious competitor to both Apple and Google for mobile devices. For Nokia, the world leader in cell phones before Apple’s iPhone changed the landscape, the deal is an admission that the company needs a partner to compete.

With the Apple model for integrating software with hardware now the norm in the industry, what will it mean for consumers?




From NPR and WBUR Boston, I'm Jeremy Hobson. It's HERE AND NOW. Can two struggling giants make one blockbuster device? That is the question today after Microsoft announced that it will buy Nokia's cell phone operation for $7.2 billion. Nokia, of course, used to be the world leader in cell phones, before the iPhone changed the landscape. It is still a top seller of traditional cell phone, especially in emerging countries, but the company has been losing billions as it has tried to establish itself in the smartphone market. And Microsoft only has about 3 percent of the U.S. smartphone market with its Windows phone. So what does this acquisition mean for the companies and for consumers? Laura Sydell is digital culture correspondent for NPR. She's with us from San Francisco. Laura, thanks for being here.

LAURA SYDELL, BYLINE: You're welcome.

HOBSON: And let's start with the big question here: Does this make Microsoft competitive in the U.S. smartphone market?

SYDELL: They hope.


SYDELL: Right? They sure hope so. I mean, it certainly will make it easier for the two companies to work together, which they've already been doing. But now, they're under one roof. So the hope is that things will happen faster. They'll be able to be more nimble. But, of course, the problem is they're now a bigger company. And so, as a bigger company, you run into problems, as well. There's more bureaucracy, potentially. I don't see that it necessarily makes them more competitive.

Perhaps people will hear about the deal and think, well, I'm used to Windows on my computer. I haven't really looked at their phone. And by - many people have said, reviewers have said it's actually a good phone. People just don't think about it. So maybe now, they'll hear about this deal. They'll think, maybe I'll look at that Windows phone.

HOBSON: Is Microsoft about to become more of a smartphone company now - the way that Apple has - than a software maker, which, of course, it traditionally has been?

SYDELL: You know, I think not necessarily. I think Apple's model of owning both the software and the hardware is one that people see won out. You know, years ago, it was Microsoft was making software for computers. They were not a hardware company. Apple always kept the two things together. And for a long time, that didn't look like the winning model. Now it appears to be. I mean, there's a lot of synergies, a lot of things you can do when you own both the hardware and the software. I don't think Microsoft is only going to suddenly become a smartphone maker. There are still a lot of other things Microsoft does - for example, its Xbox business, which is huge.

HOBSON: Right.

SYDELL: And Microsoft will still make software for computers, which, so far, while they're selling less, you know, are still not out of style. So I wouldn't say a phone maker yet.

HOBSON: Well, what about Nokia? What does this mean for them, and what really is Nokia without its smartphone business?

SYDELL: You know, they have a mapping business. They make infrastructure for communications devices. But, yeah, it pretty much cuts the company in half. And I actually saw there were some tweets from employees, and there was a lot of sadness because, for Finland, Nokia has been, you know, it put them on the map. It showed their talent. It's a home brand. One tweet I saw, which mentioned Elop - who is the CEO, or had been the CEO, who came from Microsoft - said let Elop that company. Elop - hostile takeover of a company for a minimum price through CEO infiltration. So there's some anger about it.

HOBSON: And there are questions about Elop is now going to be the successor to Steve Ballmer. But in just the 30 seconds or so we have left, what does this mean for consumers? Anything, Laura?

SYDELL: You know, so far, I really don't see anything huge that it will be for consumers, other than my sense is they will probably push this brand. You're going to hear more about this brand, and maybe people will simply say, OK. let me look at this. But I really think for most of us, it doesn't mean much.

HOBSON: Laura Sydell, digital culture correspondent for NPR, joining us from San Francisco to talk about Microsoft's announcement that it is buying Nokia's cell phone business. Laura, thanks so much.

SYDELL: You're welcome.

HOBSON: And we'll be back in a minute. HERE AND NOW. Transcript provided by NPR, Copyright NPR.

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Robin Young and Jeremy Hobson host Here & Now, a live two-hour production of NPR and WBUR Boston.

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