Microsoft_Nokia_Group5_final_anim

1. Microsoft-Nokia Acquisition Strategy Group 5: Jessica Borjas, Lauren Cool, Lili Lui, Daniel OKeefe & Warren Van Name 2. Agenda Nokia-Smartphones Microsoft & Windows Phone Acquisition-Rational and Strategies Q&A 3. 1964: Developed VHF radio 1984: Launched one of the first mass produced car phones 1987: Introduced one of the world's first handheld mobile phones 1997: Developed the first smart phone OS Symbian in a joint venture with Motorola and Ericsson 2003: First to introduce phones designed to incorporate games 2007: First phones that had offered music downloads to compete with iTunes 2007: First phone to offer satellite navigation 2008: Competed with Blackberry by offering a full QWERTY keyboard Innovators 4. 2007 Symbian OS had a 63% market share of smartphones RIM and Microsoft had about 10% market share each Nokias stock price of $40.00 2008-2010 Major players were ignored as they entered the market iOS and Android both were introduced and ignored, quickly eroding Symbians market share by roughly half 2013 Market share of smartphones had fallen to 0.3% Revenues from mobile phones were down 40% Stock price fell to$7.95. Market Share 5. Unbalanced Innovation Portfolio 2006-2010 Aggressively acquired technology corporations in order to expand product offerings Social Networking Web Browser Online Advertising Media Sharing Music Downloads Digital Mapping Digital Address book Mobile Messaging The technology was untested No advanced planning to incorporate into its mobile phone services Nokias phones were specialized for a particular audience, yet new technologies incorporated differed among its product offerings no increase in value 6. Loss of Focus 2008 Shifted its focus from the mobile phone and communications industry to the Internet They recognized Apple, Google, and Microsoft as major players but not as direct competitors 2009 Apple introduced the iPhone G3, securing 14.4% of the smartphone market 2010 Googles Android operating system was incorporated by Sony and Samsung who had previously licensed Nokias Symbian OS. Symbians market share dipped 50% while the Android OS increased 27%. 2011 Entered a strategic alliance with Microsoft focusing on the Windows Phone 7 Stock price immediately dropped 4% Nokia smartphones sales dipped to 4.6 million Euro compared to 30 million in 2010 7. 2002 Entered the smart phone market in 2002 with the release of Pocket PC 2000. Recognized early on the future of smartphone technology Integrated its successful PC Windows OS into the mobile phone market 2003-2012 Development of the Windows Mobile OS Integrated the Windows 8 OS, to become a truly cross platform OS (phone, tablet, and PC) OS Development 8. Market Share 2004 Held 11% of the US smartphone market 2007 US smartphone market share grew to 42% & global share of 12% 2011 US market share decreased as low as 1.3% with the release of Windows Phone 7 Global market share declined in parallel to 2.4% Decrease in market share mirrored that of Nokia due to the success of iOS and Android operating systems 2013 Acquires Nokias mobile phone business aiming sights high 9. The Deal Purchase price of 3.9 bn Euros Obtain licensing rights of Nokias utility patents for 10 years at an additional 1.65 bn Euros Nokia signs a non-compete agreement through December 2015 in which it cannot produce mobile devices under its own name Nokia welcomes the acquisition stating that it will allow the company to focus on its NSN business and increase its profitability 10. Value-Diversification Economies of Scope-Patents: 8,500 design patents as well as licensing rights to 30,000 utility patents Own HERE, a mapping application that will give consumers an effective alternative to Google Maps Combine Nokias licenses with its own patent agreements expanding its coverage to Samsung without additional payments Realize royalty revenue from 60 patents that are currently licensed to IBM, Motorola Mobility, and Motorola solutions Securing patents relieves some uncertainty with mobile phone shipments Eliminates licensing agreement currently held with Nokia 11. Value-Diversification Market Power-Vertical integration: First party devices, by the acquisition of device design and engineering, will put Microsoft in a position of optimizing mobile devices to match its Windows 8 OS Accelerate innovation in the areas of imaging, interactive entertainment, information capture, and connectivity ensuring Windows Phone presence Microsoft will gain a globally scaled supply chain specific to the mobile device market including established device distribution and sales networks. Microsoft will inherit tested operational processes and systems required for the production of mobile devices. 12. Speed to Market Rationale: Nokia produces 200M mobile phones per year Existing licensing agreements with Microsoft, with several devices specifically designed to run the Windows 7 and 8 Has combined worldwide mobile phone share of 15%, allowing for rapid expansion in key growth markets Microsofts believes that the key to increasing its tablet sales is to rapidly increase its OS use on smartphones. The acquisition of Nokia makes this possible 13. Synergy Smart Acquisition: Microsoft and Nokia are highly complementary in nature Existing relationship and agreements create value that Microsoft could not acquire on its own or through acquisition of another company The acquisition is relatively friendly in nature, with Microsoft maintaining Nokias operational procedures as well as leaving its sales team intact Microsoft is keeping key Nokia executives to oversee supply chain consolidation, phone device R&D, marketing, and consolidation 14. CONCLUSION-OPINION Microsofts move seems logical however, growth in market share may be limited due to the following factors: Microsoft may likely become too large and suffer from excessive diversification. Managing different fields, which require exclusive interest will be challenging The acquisition will shift resources from its core competency of software and gaming development Microsofts debt load will increase after the acquisition 15. CONCLUSION-OPINION The smartphone industry is currently saturated in established markets with Android holding an 80% share. It will be difficult for Microsoft to convince consumers in these markets to switch Windows 8 is generally disliked, with many of its PC users refusing to upgrade from Windows 7. This consumer group is key in order for success in the mobile device market When Nokia announced it was entering into a strategic alliance with Microsoft the stock price dropped by 4%. This can be viewed as an indicator of stockholder faith in the value of Microsofts OS continued 16. Q&A