microsoft nokia negotiation case study

• Browse Topics
• Executive Committee
• Affiliated Faculty
• Harvard Negotiation Project
• Great Negotiator
• American Secretaries of State Project
• Awards, Grants, and Fellowships
• Negotiation Programs
• Mediation Programs
• One-Day Programs
• In-House Training – Inquiry Form
• In-Person Programs
• Online Programs
• Advanced Materials Search
• Contact Information
• The Teaching Negotiation Resource Center Policies
• Frequently Asked Questions
• Negotiation Journal
• Harvard Negotiation Law Review
• Working Conference on AI, Technology, and Negotiation
• 40th Anniversary Symposium
• Free Reports and Program Guides

Free Videos

• Upcoming Events
• Past Events
• Event Series
• Our Mission
• Keyword Index

PON – Program on Negotiation at Harvard Law School - https://www.pon.harvard.edu

Team-Building Strategies: Building a Winning Team for Your Organization

Discover how to build a winning team and boost your business negotiation results in this free special report, Team Building Strategies for Your Organization, from Harvard Law School.

A Top International Negotiation Case Study in Business: The Microsoft-Nokia Deal

International negotiation topics in business: merging two distinct corporate cultures with as little conflict as possible.

By PON Staff — on May 2nd, 2024 / International Negotiation

We sometimes require counterparts to meet certain conditions before agreeing to enter into talks. Negotiating conditions to your participation in dealmaking can be a powerful move, but it also carries some risks that need to be carefully considered. And international negotiation brings on more challenges than most. 

Let’s look at the international negotiation case study of Microsoft’s decision to purchase Finnish mobile phone company Nokia’s mobile device business for $9.5 billion. The deal, which closed in 2014, quickly proved disastrous: Microsoft wrote off nearly all of the deal’s value and laid off thousands of workers in July 2015. Although there were many reasons the deal was a bad bet for Microsoft, a negotiating condition that Nokia set before agreeing to take part in serious negotiations may have offered one warning sign. 

Claim your FREE copy: International Negotiations

Claim your copy of International Negotiations: Cross-Cultural Communication Skills for International Business Executives from
 the Program on Negotiation at Harvard Law School.

International Negotiation Behind the Microsoft and Nokia Deal: Nokia Builds Its BATNA

Microsoft and Nokia had been partners since 2011, when the Finnish firm began installing Microsoft’s Windows Phone operating system (OS) on its smartphones. But Nokia lagged far behind smartphone competitors in innovation and market share, and the Windows Phone OS, used primarily on Nokia handsets, was failing to meet expectations.

In January 2013, Microsoft CEO Steven Ballmer called Risto Siilasmaa, the chairman of Nokia’s board of directors, to raise the possibility of Microsoft buying divisions of Nokia. Soon after, the two men discussed the idea at a conference in Spain. They agreed inefficiencies existed in their agreement and brainstormed solutions, from minor tweaks to business mergers, reports Ina Fried on the technology news website AllThingsD.com . 

Nokia considered letting its deal with Microsoft lapse and trying to revive its handset business by adapting its smartphones to Google’s Android system. By cultivating this strong BATNA , or best alternative to a negotiated agreement, Nokia gained the power to walk away from a subpar offer from Microsoft.

Indeed, after hearing Microsoft’s first formal pitch for an acquisition in New York, Siilasmaa informed Ballmer that they were too far apart on price and other issues, such as which company would own Here, Nokia’s mapping service. Nokia executives believed they needed to hold on to their ability to sell Here to other companies. Meanwhile, Microsoft felt it couldn’t keep pace with competitors without controlling the mapping technology it was using in its phones, tablets, and PCs, and on the web, according to AllThingsD.com. Subsequent meetings between the parties in London and Finland went nowhere .  

A Deal Takes Shape

A breakthrough came when Nokia informed Microsoft that it would proceed with formal talks only if Microsoft agreed to abide by certain negotiating conditions , most notably a commitment to set up a financing source for Nokia and the caveat that Here was off the table. 

Microsoft agreed. At a meeting in New York, the parties happened upon a solution to the question of who would control the mapping service. Why not share the code, with Nokia retaining intellectual-property rights to Here? Nokia realized it could grant Microsoft a license to access and customize Here’s source code and own any improvements it made. Nokia would retain ownership of Here and the power to license the service to other companies. Ballmer and Siilasmaa shook hands on the outlines of an agreement, which was filled out over the next two months. 

The Risks of Setting Negotiating Conditions

A negotiating condition is an “if” statement—such as, “If you agree to take this issue off the table, I’ll negotiate”—that qualifies your entry into a negotiation or acceptance of a deal. Setting negotiating conditions can be a particularly useful tool when it comes to improving the appeal of another party’s onerous request or demand, notes Harvard Business School and Harvard Law School professor Guhan Subramanian

But insisting that the other party agree to certain terms as a precondition to negotiation can be risky. In their 2012 labor dispute, for example, the musicians of the Minnesota Orchestra said for many months that they would negotiate with the orchestra’s management only after a lockout ended. But management was loath to accept this negotiating condition , aware that the players would have little motivation to accept significant salary cuts if they were performing and being paid. 

Before stipulating a negotiating condition , remember that your counterpart will weigh the costs and benefits of accepting your negotiating conditions against their alternatives away from the table. If you have a strong BATNA , as Nokia appeared to, then it may make sense to take this risk. But note that even in this case, Microsoft made inroads on the mapping service issue that Nokia had claimed was nonnegotiable. Microsoft may have salvaged the deal by refusing to assume that Nokia’s negotiating conditions were nonnegotiable—a move Microsoft’s leaders likely later came to regret.

Two key lessons on negotiating terms and conditions emerge from these failed negotiation examples . First, you should demand only those conditions that are truly deal breakers for you. Second, try to craft negotiating conditions in ways that provide benefits or concessions to your counterpart. Even when you have the power to get what you want, your efforts to help your counterparts get what they want will pay off in the form of stronger relationships and longer-lasting deals.

Have you had experience negotiating conditions to a deal within an international negotiation? If so, how did the process work out?

Related Posts

• Cross Cultural Communication: Translation and Negotiation
• Famous Negotiators: Tony Blair’s 10 Principles to Guide Diplomats in International Conflict Resolution
• What is the Multi-Door Courthouse Concept
• Famous Negotiators: Angela Merkel and Vladimir Putin
• The Importance of Relationship Building in China

No Responses to “A Top International Negotiation Case Study in Business: The Microsoft-Nokia Deal”

3 responses to “a top international negotiation case study in business: the microsoft-nokia deal”.

There are no more phones with ‘Nokia Lumia’. They are all ‘Microsoft Lumia’. Microsoft completely scraped the company and rebranded the devices. Nokia got a bad future

There has been a completely mixed response to whether the deal was good or was a decision taken in a hurry. Nokia surely can use this incoming cash flow on some great products, but the issue now is that Nokia was recognized by its Mobile Devices and there will be almost zero difference between a new product category (coz no more mobile phones)coming under the NOKIA brand name or a completely new Brand name because they will both have zero popularity in that field.

It would probably be good for Nokia to come up with a new brand name and leave the Nokia legacy behind in its Nokia Research Department and nowhere else. As you could feel, this deal saddens me 🙁

It’s 2015 now buddy and Nokia’s all of microsoft now. You should be a lot sad now 😛

Click here to cancel reply.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Negotiation and Leadership

• Learn More about Negotiation and Leadership

NEGOTIATION MASTER CLASS

• Learn More about Harvard Negotiation Master Class

Negotiation Essentials Online

• Learn More about Negotiation Essentials Online

Beyond the Back Table: Working with People and Organizations to Get to Yes

• Learn More about Beyond the Back Table

Select Your Free Special Report

• Negotiation Master Class November 2024 Program Guide
• Beyond the Back Table September 2024 and February 2025 Program Guide
• Negotiation and Leadership Fall 2024 Program Guide
• Negotiation Essentials Online (NEO) Spring 2024 Program Guide
• Negotiation and Leadership Spring 2024 Program Guide
• Make the Most of Online Negotiations
• Managing Multiparty Negotiations
• Getting the Deal Done
• Salary Negotiation: How to Negotiate Salary: Learn the Best Techniques to Help You Manage the Most Difficult Salary Negotiations and What You Need to Know When Asking for a Raise
• Overcoming Cultural Barriers in Negotiation: Cross Cultural Communication Techniques and Negotiation Skills From International Business and Diplomacy

Teaching Negotiation Resource Center

• Teaching Materials and Publications

Stay Connected to PON

Preparing for negotiation.

Understanding how to arrange the meeting space is a key aspect of preparing for negotiation. In this video, Professor Guhan Subramanian discusses a real world example of how seating arrangements can influence a negotiator’s success. This discussion was held at the 3 day executive education workshop for senior executives at the Program on Negotiation at Harvard Law School.

Guhan Subramanian is the Professor of Law and Business at the Harvard Law School and Professor of Business Law at the Harvard Business School.

Articles & Insights

• Managing Difficult Negotiators
• Learning from BATNA Examples in Negotiation
• Power and Negotiation: Advice on First Offers
• 10 Hard-Bargaining Tactics to Watch Out for in a Negotiation
• The Good Cop, Bad Cop Negotiation Strategy
• How to Set Negotiation Goals as a Manager
• Signing Bonus Negotiation 101
• Top 10 Notable Negotiations of 2022
• Framing in Negotiation
• Negotiation Tactics, BATNA and Examples for Creating Value in Business Negotiations
• How Conflict Examples Can Teach Us to Listen
• Business Conflict Management
• Conflict Resolution Examples in History: Learning from Nuclear Disarmament
• Strategies to Resolve Conflict over Deeply Held Values
• How to Handle Conflict in Teams: Lessons from Scientific Collaborations
• AI Negotiation in the News
• Crisis Negotiation Skills: The Hostage Negotiator’s Drill
• Police Negotiation Techniques from the NYPD Crisis Negotiations Team
• Famous Negotiations Cases – NBA and the Power of Deadlines at the Bargaining Table
• Negotiating Change During the Covid-19 Pandemic
• Dealing with Difficult People and Negotiation: When Should You Give Up the Fight?
• Managing Difficult Employees: Listening to Learn
• Dealing with Hardball Tactics in Negotiation
• Dealing with Difficult People: Coping with an Insulting Offer in Contract Negotiations
• When Dealing with Difficult People, Look Inward
• Negotiating Skills: Learn How to Build Trust at the Negotiation Table
• What is Distributive Negotiation and Five Proven Strategies
• Dear Negotiation Coach: How Should I Handle an Early Offer Negotiation?
• Managing a Multiparty Negotiation
• MESO Negotiation: The Benefits of Making Multiple Equivalent Simultaneous Offers in Business Negotiations
• In Contract Negotiations, Agree on How You’ll Disagree
• Union Strikes and Dispute Resolution Strategies
• The Importance of Power in Negotiations: Taylor Swift Shakes it Off
• Settling Out of Court: Negotiating in the Shadow of the Law
• How to Negotiate with Friends and Family
• Moral Leadership: Do Women Negotiate More Ethically than Men?
• What Is Facilitative Leadership?
• What Is Collective Leadership?
• Advantages and Disadvantages of Leadership Styles: Uncovering Bias and Generating Mutual Gains
• Leadership and Decision-Making: Empowering Better Decisions
• Employee Mediation Techniques – Resolve Disputes and Manage Conflict with These Mediation Skills
• How Mediation Works When Both Parties Agree They Need Help Resolving the Dispute
• Negotiations and Logrolling: Discover Opportunities to Generate Mutual Gains
• Using E-Mediation and Online Mediation Techniques for Conflict Resolution
• Undecided on Your Dispute Resolution Process? Combine Mediation and Arbitration, Known as Med-Arb
• Six Guidelines for “Getting to Yes”
• When a Job Offer is “Nonnegotiable”
• Emotional Intelligence as a Negotiating Skill
• Principled Negotiation: Focus on Interests to Create Value
• Power in Negotiation: The Impact on Negotiators and the Negotiation Process
• 3-D Negotiation Strategy
• Use a Negotiation Preparation Worksheet for Continuous Improvement
• The Importance of a Relationship in Negotiation
• Collaborative Negotiation Examples: Tenants and Landlords
• Ethics and Negotiation: 5 Principles of Negotiation to Boost Your Bargaining Skills in Business Situations
• Are Salary Negotiation Skills Different for Men and Women?
• How to Ask for a Salary Increase
• How to Negotiate Salary: 3 Winning Strategies
• How to Negotiate a Higher Salary
• Setting Standards in Negotiations
• Teaching Contract Negotiation: Using the Mutual Gains Approach
• Teaching Mediation: Exercises to Help Students Acquire Mediation Skills
• Teach Your Students to Negotiate a Management Crisis
• Teaching with Multi-Round Simulations: Balancing Internal and External Negotiations
• Asynchronous Learning: Negotiation Exercises to Keep Students Engaged Outside the Classroom
• 5 Win-Win Negotiation Strategies
• What is a Win-Win Negotiation?
• Win-Win Negotiation: Managing Your Counterpart’s Satisfaction
• Win-Lose Negotiation Examples
• How to Negotiate Mutually Beneficial Noncompete Agreements

PON Publications

• Negotiation Data Repository (NDR)
• New Frontiers, New Roleplays: Next Generation Teaching and Training
• Negotiating Transboundary Water Agreements
• Learning from Practice to Teach for Practice—Reflections From a Novel Training Series for International Climate Negotiators
• Insights From PON’s Great Negotiators and the American Secretaries of State Program
• Gender and Privilege in Negotiation

Remember Me This setting should only be used on your home or work computer.

Lost your password? Create a new password of your choice.

Copyright © 2024 Negotiation Daily. All rights reserved.

Microsoft Corporation’s Acquisition of Nokia Case Study

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

The Microsoft Corporation purchased the Nokia phone business in 2014 for approximately $7.2 billion. Although Nokia could be labeled as a profitable business during that time, it was a downstream customer for Microsoft. Thus, it was unclear whether the deal was beneficial for Microsoft since Nokia was not even a leader in the mobile phone industry.

The issue that Microsoft had to resolve was the negotiation process between the companies as the negotiators were from different cultural origins: Microsoft is an American company, while Nokia is a European (Finnish) one. What is more, the strategies and aims of both companies were different: while Microsoft was trying to become present in the mobile phone market, Nokia wanted to be provided with a serious capital that could help it deal with expensive operations and productions. However, it should be noted that negotiations between the two companies took place before Microsoft acquired Nokia: in 2011, the Windows 7 Platform was presented on Nokia phones. At first, the companies only cooperated to develop new devices and products. Only three years after the first cooperation Nokia was purchased by Microsoft. This decision implies that this type of partnership was profitable for both companies at first.

Another problem of these negotiations is the fact that companies often do not see their counterparts as individuals; thus, one of the companies (Nokia) had to abandon its identity to receive benefits from the synergetic deal. However, as it can be seen from the case study, Windows phones were not as popular as it was expected and did not bring Microsoft visible presence and recognition in the mobile phone market, where Apple and Android were the main leaders.

While the deal might appear as unprofitable at first, it may present some benefits in the long run. Nevertheless, Microsoft is not the first company that chose to purchase a “downstream customer” in order to target a new market where the corporation was not present. Acquiring a company that is not a leader anymore can be a risky decision, and, in Microsoft’s case, it led to a reduction in the value of the company. Moreover, it also brought little benefit to Nokia, although the Finnish company had expected other outcomes. While Microsoft tried to resurrect the former leader in the mobile phone market, Nokia experienced losses and thousands of job cuts due to Microsoft’s workforce management policy in 2014. Thus, the deal was not as profitable as both companies had expected.

One question remains to be answered: why did Microsoft decide to involve in this deal if it was clear that the deal was not profitable? On the one hand, this deal was unlikely to harm Microsoft’s core business. On the other hand, the corporation tried to present a new product (Windows Phone) by purchasing a (once stable) company in decline – not an entirely new approach. It can work if the odds are in your favor. However, as it can be seen, Windows Phone cannot compete with iPhones and Android devices, and Microsoft’s presence in the smartphone market is still relatively small. Android is capable of expanding because this operating system can be installed on multiple devices from various manufacturers (Samsung, LG, Lenovo, Huawei, etc.). Windows 7 and 8 for mobile phones are mostly used on Nokia smartphones that cannot compete with Samsung, not to mention other companies. Thus, Microsoft’s acquisition of Nokia was unprofitable. It is possible to assume that this deal will bring more additional losses in the future.

• How to Create a Brand Extension of Nokia Phones With Nokia I-Phones
• Nokia Corporation's Financial Failure and Advice
• A Critical Analysis of Nokia Corporation
• Abbott Hospital's Acquisition and Human Resource Issues
• Choice Hotels International and Lewin's Change Model
• Cattaraugus County Rehabilitation Center's Administration
• Koch Industries: Charles and Bill's Sources of Power
• Emirates Airlines' Premium Economy Class
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2020, November 11). Microsoft Corporation's Acquisition of Nokia. https://ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/

"Microsoft Corporation's Acquisition of Nokia." IvyPanda , 11 Nov. 2020, ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/.

IvyPanda . (2020) 'Microsoft Corporation's Acquisition of Nokia'. 11 November.

IvyPanda . 2020. "Microsoft Corporation's Acquisition of Nokia." November 11, 2020. https://ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/.

1. IvyPanda . "Microsoft Corporation's Acquisition of Nokia." November 11, 2020. https://ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/.

Bibliography

IvyPanda . "Microsoft Corporation's Acquisition of Nokia." November 11, 2020. https://ivypanda.com/essays/microsoft-corporations-acquisition-of-nokia/.

Related Topics

• Digital Transformation
• IT Staffing & Careers
• IT Management
• IT Strategy

Recent in  Leadership

• Cybersecurity
• Risk Management
• Incident Response

Recent in  Resilience

• Responsible AI
• IT Automation
• AI Innovations

Recent in  ML & AI

• Data Privacy
• Data Governance

Recent in  Data

Recent in  sustainability.

• Data Centers
• Cloud Computing

Recent in  Infrastructure

• Software Platforms
• Operating Systems

Recent in  Software

• Newsletters
• Reports/Research
• Online Events
• Live Events
• White Papers
• Advertise With Us
• IT Leadership

Microsoft's Nokia Deal, Analyzed

Microsoft announced plans to buy Nokia's handset business for $7.2 billion. We examine the move's pros and cons.

September 3, 2013

Tablet Buying Demystified: 10 Tips

Rumblings about a Microsoft-Nokia acquisition have been around for months. Microsoft made the news a reality Tuesday and announced a $7.2 billion deal for the company's devices division. Talks between the two companies started as far back as February, but took off in earnest in July. According to the deal reached today, Microsoft is acquiring just the handset business from Nokia, as well as the "Lumia" and "Asha" brands. Nokia's networking business, services business and Here mapping teams will remain in Espoo under the Nokia brand.

In a letter to Microsoft employees, CEO Steve Ballmer said the move is "a bold step into the future." It's also the "next big phase of the transformation" the company announced in July. "We are very excited about the proposal to bring the best mobile device efforts of Microsoft and Nokia together," continued Ballmer. "Our Windows Phone partnership over the past two and half years has yielded incredible work. Our partnership has also yielded incredible growth. In fact, Nokia Windows Phones are the fastest-growing phones in the smartphone market. Now is the time to build on this momentum and accelerate our share and profits in phones."

All the rah-rah aside, it's a move that makes sense from a number of angles. Consider Apple and BlackBerry.

Apple makes not only the platform for its smartphones, but also the devices. iOS and the iPhone are fully under Apple's control. That means all the costs and all the profits are born and won by Apple. This strategy has worked well for Apple during the past six years. BlackBerry operates the same way, though its fortunes have headed south. BlackBerry makes both the operating system and the smartphones that run the OS. Though it stumbled (mostly due to bad leadership), its business model let it maintain control and own all the profits (when it actually made some).

To date, this is not how Microsoft has operated. It makes the operating system, and its hardware partners -- HTC, LG, Nokia, Microsoft, Samsung, ZTE and others -- make the hardware. There's been a seismic shift in the Windows Phone ecosystem during the last few quarters, though. At last check, Nokia was responsible for 87% of all Windows Phone handset sales. That's an incredible number that Microsoft could no longer ignore. With Nokia's design and manufacturing businesses under its purview, Microsoft can create more seamless products that work even better with its developing ecosystem.

Of course, we only have to look at the Surface debacle to know how badly Microsoft can screw up a hardware business.

One key aspect of the deal noted by Microsoft Tuesday is that the company will continue to license Windows Phone to other hardware makers, despite its new position as a hardware maker. (Microsoft is now in a position similar to Google, which bought Motorola's handset division, though it also licenses Android to other OEMs). Just because Microsoft says it is going to license Windows Phone, though, doesn't mean it is going to happen. This is one of the big risks being taken by Microsoft.

The purchase of Nokia's hardware business may scare off the few remaining Windows Phone vendors. Windows Phone is the third horse in a two-horse race between Android and iOS. Android is three-quarters of a length ahead while Windows Phone has barely left the gate. Why should HTC, Samsung and the others bother to make new WP8 devices given how few they were selling in the first place? There's little incentive for them now. Android is a cheaper and more popular option. If Microsoft loses these partners, it will be a blow to the company. HTC, for example, has been making Windows-branded hardware for 10 or more years.

Another sticking point of the deal is that Microsoft did not acquire the "Nokia" brand. It acquired the Lumia and Asha brands, which Nokia calls its smart devices. Nokia is holding onto its feature phone business and the Nokia brand. That means "Lumia" smartphones will no longer be Nokia devices, but Microsoft devices. Microsoft may have worldwide brand recognition, but Nokia's equity in the phone market is still invaluable. Nokia was smart enough to realize that and retain control over its brand. The problem this generates for Microsoft is that it will automatically lose some of the appeal Lumia devices carried with them.

Microsoft is certainly gaining a solid business. Nokia has done an admirable job turning around its smartphone division during the last two years. Though it still has a long way to go, perhaps Microsoft's ownership of the devices team will provide the resources it needs to keep churning out attractive, usable smartphones. In other words, let's hope Microsoft doesn't change anything about what Nokia's doing, especially if it means taking things in a more Surface-y direction. Microsoft will do well to let Nokia's designers keep doing what they're doing. There's a real chance the synergies created by having the hardware and software teams under one roof will (eventually) play off.

Microsoft is taking a big risk in alienating its existing partners, though. Some may throw in the towel, and no one would blame them for doing so.

Microsoft Lync continues to be one of the hottest topics in enterprise communications. Enterprises continue to deepen their engagement with Lync and are finding value in the unified communications capabilities that it offers. In this virtual event from Enterprise Connect, Lync experts will update you on the most recent trends in Lync adoption, feature/functionality enhancements, and best practices. Register today for the Enterprise Connect free virtual event on Microsoft Lync and join us on Wednesday, Sept. 11.

About the Author(s)

Contributor

Eric is a freelance writer for InformationWeek specializing in mobile technologies.

You May Also Like

Tales of a Modern Data Breach: The Rise of Mobile Attacks

The CIOs Guide to Enhancing GRC in 2024

Enhance Cloud Security with Cloud-Native Security

2024 InformationWeek US IT Salary Report

*The Need for Modern Observation in Complex Cloud Environments

Enterprises' Biggest Obstacles to Maintaining Cyber Resiliency

Using Security Automation to Solve Workforce Shortages, Alert Fatigue, and More

2022 State of ITOps and SecOps

Editor's Choice

Jun 4, 2024

Jun 3, 2024

Jun 6, 2024

The Benefits of Unifying Digital Experiences

Understanding the Network Underlay: An Unsung Hero of Enterprise Connectivity

Attacker Economics Infographic

Attacker Economics

Zoom Workplace Solution Brief

[Virtual Event] Cyber Resilience in 2024: Availability is Your Best Ability

• DOI: 10.54691/bcpbm.v16i.308
• Corpus ID: 246786977

Deal making analysis: Microsoft acquired Nokia

• Tier Cao , Zejian Han , Hailu Zhang
• Published in BCP Business & Management 26 December 2021

Figures from this paper

7 References

Related papers.

Showing 1 through 3 of 0 Related Papers

The New York Times

Bits | behind microsoft deal, the specter of a nokia android phone, behind microsoft deal, the specter of a nokia android phone.

And now, it is clear that a Nokia Android phone was more than a possibility. It was real.

A team within Nokia had Android up and running on the company’s Lumia handsets well before Microsoft and Nokia began negotiating Microsoft’s $7.2 billion acquisition of Nokia’s mobile phone and services business, according to two people briefed on the effort who declined to be identified because the project was confidential. Microsoft executives were aware of the existence of the project, these people said.

Another person said the idea of Nokia using Android wasn’t a part of Microsoft’s discussions with the company about an acquisition, even though that was widely recognized as a possibility.

On one level, Nokia’s Android effort is not shocking. Companies often have “plan Bs” in the works in case they need to change course on strategy or want to help negotiate better terms with partners. Getting Android to run on Nokia’s hardware was not a Herculean engineering effort, according to the people familiar with the project.

Still, a functioning Nokia Android phone could have served as a powerful prop in Nokia’s dealings with Microsoft, a tangible reminder that Nokia could move away from Microsoft’s Windows Phone software and use the Android operating system, which powers more than three out of every four smartphones sold globally.

Susan Sheehan, a spokeswoman for Nokia, declined to comment, as did Frank Shaw, a Microsoft spokesman.

Nokia reached a deal with Microsoft in 2011 to use Windows Phone on its smartphones, but Nokia had an option to exit that partnership at the end of 2014. Unraveling that deal would have been painful for both parties. It would have been devastating to Microsoft’s mobile phone efforts since Nokia accounts for more than 80 percent of the Windows Phone handsets sold. For Nokia, changing such an important ingredient in its products would have been a costly setback too.

Nokia has faced criticism that it made the wrong decision in choosing Windows Phone over Android several years ago. Nokia’s share of the smartphone market fell to 3 percent during the first half of 2013, from 32.8 percent in 2010.

There is no telling for sure whether Nokia would have been better off with Android over that time. It is possible the design of the operating system and greater abundance of Android apps might have put Nokia in a better spot.

The current status of Nokia’s Android project is unclear. Presumably, after Microsoft completes its acquisition of Nokia’s phone business early next year, there won’t be much future for it.

What's Next

More From Forbes

Winners and losers in the microsoft nokia deal.

• Share to Facebook
• Share to Twitter
• Share to Linkedin

Microsoft rocked the mobile industry when it announced its acquistion of Nokia's Devices & Services unit for $5 billion with additional $2.2 billio n to license Nokia 's patents. This is the second largest deal in total value done by Microsoft , just behind its $9.3 billion deal for Skype.

In 2011 Marc Andreessen  of Andreessen Horowitz wrote an article about how software was eating the world. Nokia’s device business sale to Microsoft highlights that point.  Increasingly the value of  the mobile device market  is in the operating system and the applications that are designed for these systems. In an intensely competitive mobile devices market, beautiful hardware is a requirement, not a differentiator, in the space.

Frankly, the industry had come to a point where most of the mobile hardware looked the same. If you stripped the label from a Samsung or HTC device, it was difficult to distinguish between the phones. Iconic design didn’t fit the mold of outsourced components and manufacturing.  Nokia was one of the exceptions to this rule. It makes beautiful hardware in shocking colors. The camera design for its latest Lumia line offers world-class quality and an unusual design. But it wasn’t enough. Perhaps Nokia’s hardware prowess could’ve saved them if it had retained and evolved the Symbian OS, but the deal with Microsoft in 2011 changed the company’s path.

What’s interesting about this announcement is Microsoft’s change of heart on the need for a vertically integrated hardware play. It’s seen great success with Xbox and it’s watched Apple ’s success. Apple's control over the hardware, software and services experience has provided a winning market combination. While Apple faces competition from the Android ecosystem, it's integration strategy has allowed it to retain solid market presence in the face of steep competition. It will take Microsoft years to build a similar strategy and foothold but at least the company has finally put a firm stake in the ground.

Here are my thoughts on winners and losers as a result of the acquisition.

• Nokia wins as it sells a business that’s becoming increasingly difficult to generate profits. The smartphone market's average sales price has fallen to $375 according to IDC. Prices will continue to decline as sales move to emerging markets and markets where lower cost phones are in high demand.
• Microsoft’s tablet business has been anemic at best. The company took a major hit to it's Q4 financials with a massive $900 million inventory write down charge for its Surface RT units. While enterprise customers balked at the changes in operating system for the Surface tablets, the tablet hardware was also hindering sales.  Microsoft purchase of Nokia’s device team gives it real design skill for future Surface tablets.
• Enterprise buyers. The Nokia team understands software user experience design. The combination will help take Microsoft’s operating system to the next level. In the battle for mobile software developer mindshare, Android and IOS were winning. I expect more developers to write software for the Windows Phones OS now that its evident that Microsoft is taking the mobile market seriously.
• Blackberry. Nokia’s market capitalization was over $12 billion in May but the deal for the hardware business was only $5 Billion. Blackberry’s total current market capitalization is at $5 billion. Nokia’s sale price may not detract from Blackberry’s $5 billion market capitalization but it severely limited any upside. An August article from the Rayno repor t pegged Blackberry’s sales value at $6-10 per share.  Blackberry’s sales value will be based on the valuation of its patent portfolio, not its hardware business.
• HTC and LG. These companies failed to push the Windows Phone OS and now they’ll have to compete against Microsoft. At a time when Samsung is eating everyone’s lunch, these companies need allies, not new competition. However, it’s most likely that Microsoft will use its move into hardware to convince companies, such as HTC and LG, to building more phones for the Windows Phone OS than Android.
• HP purchased Palm for $1.2 billion and shuttered it a year later. After this spectacular waste of money and talent, HP claims it’s once again serious about mobile. While it will continue to work with Microsoft, it could purchase Blackberry and make a play for the enterprise market.
• HTC, LG, or Lenovo could make a play for Blackberry but it’s unlikely these companies would achieve regulatory approval.
• Nokia could purchase Blackberry’s patent portfolio and become a patent licensing house. As more companies look to build contextual services, mapping technology and communications-related patents are becoming increasingly important. What if Nokia used its money from Microsoft to buy Blackberry’s patent portfolio?

Microsoft originally owned the mobile business with Windows CE but ceded ground to Palm, Apple and others.  We’ve waited years for Microsoft to get serious about the mobile business. The combination of a change in senior management at Microsoft and the purchase of Nokia’s hardware business indicate that change is finally here.  The question is how will the industry react. What are your thoughts on the future of the mobile device market? Please leave your comments here or send me a message on Twitter @MaribelLopez.

Related on Forbes:

Gallery: Nokia Lumia 1020

• Editorial Standards
• Reprints & Permissions

Product details

Microsoft-Nokia culture clash will be tough to overcome

Professor of Organisational Behaviour, Cass Business School, City, University of London

Disclosure statement

Andre Spicer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

City, University of London provides funding as a founding partner of The Conversation UK.

View all partners

Among Western nations it would be difficult to find two cultures as different as the US and Finland. Americans are stereotypically confident and outgoing; Finns considerably more reserved. This is even reflected in the economies of the two nations: the US is the home of free-market capitalism; Finland is the poster-child of European social democracy.

These are just stereotypes, of course, but they do give you a hint of some of the real challenges that Microsoft is likely to face as it seeks to integrate Nokia’s mobile phone division, which it has purchased for €5.4 billion .

The purchase was announced with great fanfare by both Microsoft and Nokia senior management. For Nokia, the deal is seen as a way to exit from the handset market. Although they once dominated this sector, they are now well behind market leaders Apple and Samsung. For Microsoft, the purchase is a way for them to add a mobile hardware component that will allow them to compete head to head with Apple and Google.

Although the rhetoric around the deal sounds good, the reality is likely to be much messier. The research suggests that most mergers and acquisitions tend to destroy rather than create value.

Indeed, the history of Microsoft during the past decade has served as a remarkable case study of this basic rule. When outgoing CEO, Steve Ballmer, took over in 2000 it was absolutely dominant in its field and its share price was at an all-time high. During Ballmer’s tenure we have seen a stream of acquisitions, uncertain innovation and a stagnation of its shareprice. A New Yorker journalist recently quipped that Ballmer had finally figured out a way to make some money – he quit .

Maybe the acquisition of Nokia should be seen not as a shrewd strategic move, but more like one of the last great acts of the Ballmer regime. Indeed, research suggests that CEOs tend to become addicted to mergers and acquisitions , despite their declining returns.

The hubris of CEOs plays a big role here. Feelings of greatness often lead then to paint a rosy future picture of takeovers. They are also likely to overlook the significant risks that come with any acquisitions. This is all depressing news for Microsoft shareholders – if the research in the area is anything to go by, they are unlikely to see any significant gains from the acquisition of Nokia. In fact, they are actually likely to lose out.

But shareholders are not the only ones who will lose out. The future is likely to be relatively grim for employees in the Nokia phones division. There have already been reports in the Finnish press that many are worried about losing their jobs . This comes on the heels of a stream of layoffs in recent years.

But even for those who hold on to their jobs, life under the Microsoft regime is likely to be difficult. Merging cultures following an acquisition often proves to be difficult, if not impossible. A common outcome is talent staff crucial to the success of the company leave. Those who are left behind are likely to be relatively cynical. This typically leads to companies losing their innovate edge – often precisely what they were purchased for in the first place. This bodes poorly for the Nokia handsets division. Following the Microsoft deal it is likely to become an innovation deadzone, staffed by embittered cynics.

Members of the broader public are the final losers from this deal. Despite all the talk of how competitive the mobile business is, it is actually a market dominated by a few players. The increasing integration of hardware and software has meant a small handful of companies like Apple, Google and now Microsoft are in all our pockets.

This presents big concerns about who owns, controls and watches over our personal data. After all, many of these players are not just funky tech companies, they are also consumer surveillance companies. The purchase of Nokia by Microsoft represents a further step towards the consolidation of this market. But it also may represent a further step towards the consolidation of a few companies’ control over our personal data.

If this deal is likely to create so many losers, why is it going ahead? Well, there are likely to be some big winners as well. For one, Nokia shareholders seem to have benefited significantly with a big jump in share price following the announcement. The senior executives who put the deal together are also likely to do well out of the deal. Research suggests that when CEOs go on buying sprees – even unsuccessful ones - they are likely to get a bump in their reward package as well as a nice ego boost.

A final winner hidden in the wings is the army of advisers and consultants and such like who will gain a significant chunk of the transaction costs involved in trying to knit these two businesses together – and cleaning up the mess afterwards.

• Mobile phones
• Telecommunications
• Mergers and acquisitions

Head of School, School of Arts & Social Sciences, Monash University Malaysia

Chief Operating Officer (COO)

Clinical Teaching Fellow

Data Manager

Director, Social Policy

Microsoft-Nokia deal: 11 quick facts

Microsoft and Nokia: Together at last.

The two companies announced late on Monday that Microsoft will acquire Nokia's phone-making unit for about $7.2 billion in total — including patents — allowing the (now) former Finnish phone maker to expand its presence and technologies in other markets.

Microsoft to buy Nokia's devices, services unit for $7.2B

The rationale behind the deal is to secure the Windows Phone ecosystem, as well as accelerating Microsoft's phone market share. In a presentation published on Monday (PDF) , Microsoft said it wants to bring "one brand" through a "united voice."

Nokia will retain its other technology units, including Nokia Solutions and Networks (formerly Nokia-Siemens Networks), Nokia Here, its CTO office, and its patent portfolio.

With so many moving parts, we've picked out the key facts of the complicated, lengthy, and likely to be scrutinized deal, which is expected to close in the first quarter of 2014.

The deal is split between the phone-making unit and Nokia's patents. Microsoft will spend $5 billion (€3.79bn) on the phone-making unit, and $2.17 billion (€1.65bn) on licensing Nokia's patents.

32,000 Nokia employees will transfer to Microsoft, including 4,700 people in Finland.

Nokia sold 7.4 million Lumia smartphones in the second quarter of 2013.

• I replaced my boring workouts with Meta Quest's Supernatural app, and can't imagine going back
• This Finnish startup's new VR headset rivals Apple's Vision Pro - and business users will love it
• Meta's $500 Quest 3 is the mainstream VR headset I've been waiting for, and it delivers
• I tried Apple Vision Pro and it's far ahead of where I expected
• The best VR headsets right now (and they're not just from Meta)

Nokia chief executive Stephen Elop, who previously served as an executive at Microsoft, will once again join the software giant, heading up the phone-making division that Microsoft just bought.

Microsoft's Julie Larson-Green, currently in charge of the company's own devices and studios team, will continue to work on the Xbox One and Surface devices, but will join Elop's team once the deal closes.

All Microsoft and Nokia global marketing will fall under current executives Tami Reller and Mark Penn.

During that same quarter, Nokia sold 53.7 million units of its feature phone range.

Nokia will retain its patent portfolio, but will give Microsoft a 10-year license to its patents at the time of the deal closing.

Microsoft will make available to Nokia about €1.5 billion ($1.97bn) in financing in the form of three payments of €500 million ($659m) from overseas resources.

Nokia shareholders are expected to vote on the deal in an extraordinary general meeting on November 19 this year.

Microsoft will build a datacenter in Finland that will serve Microsoft and Nokia customers in Europe. More than $750 million in capital will be spent on the new datacenter over the next few years.

Besides that, Ballmer noted in an email, "There are no significant plans to shift where work is done in the world as we integrate, so we expect the Nokia teams to stay largely in place, geographically."

Global coverage:   Nokia Interim CEO: Microsoft deal makes us stronger  |  Even with Nokia devices, Microsoft wants to license Windows Phone to other makers  |  Does its Nokia buy thwart or fuel a possible Microsoft break-up?  |  Microsoft shows how to flush decades of Nokia goodwill away  |  Microsoft gets less than $10 per Windows Phone unit  |  Microsoft-Nokia deal: Reaction from the Twitter trenches  |  Elop drops Nokia CEO role to lead devices team under Microsoft deal  |  Microsoft to buy Nokia's devices, services unit for $7.2B

Here's every iPhone model that will support Apple's upcoming AI features (for now)

Four ios 18 ai features the iphone needs to catch up with android, need a multitool these are the only two brands i recommend and why.

Provide details on what you need help with along with a budget and time limit. Questions are posted anonymously and can be made 100% private.

Studypool matches you to the best tutor to help you with your question. Our tutors are highly qualified and vetted.

Your matched tutor provides personalized help according to your question details. Payment is made only after you have completed your 1-on-1 session and are satisfied with your session.

Harrisburg University The Microsoft Nokia Deal Negotiation Case Analysis

User Generated

Business Finance

Description

The Microsoft-Nokia Deal

International negotiation topics in business: merging two distinct corporate cultures with as little conflict as possible . Please refer the attachment. Negotiation Case Analysis

Unformatted Attachment Preview

Explanation & Answer

Attached. Running head: NEGOTIATION CASE ANALYSIS: NOKIA AND MICROSOFT Negotiation Case Analysis: Nokia and Microsoft Author’s Name Institutional Affiliation Date: 1 NEGOTIATION CASE ANALYSIS: NOKIA AND MICROSOFT 2 Type of Negotiation Microsoft bought Nokia handsets and administrations for 7.2 billion dollars (Abol, 2015). The two companies entered into an Integrative kind of negotiation where Nokia presumably needed more but yet was required to agree to settle for less since their organization was not aware of the ages or rivalry. The first procedure of distributive negotiation is to settle inside a positive bargaining range. The goal of Microsoft and Nokia is to get into much of the talks as could reasonably be expected. The Nokia and Microsoft teams in distributive bargaining realize that they may need to do with less than their targets or objectives of the negotiation. However, they trusted that the agreement would be superior to their resistance point. For consent to happen, Nokia and Microsoft had to accept that despite the settlement been less than th...

24/7 Homework Help

Stuck on a homework question? Our verified tutors can answer all questions, from basic  math  to advanced rocket science !

Similar Content

Related tags.

technology market analysis marketing product marketing Hotel marketing religion products IBM marketing strategy Case study report

Narrative of the Life of Frederick Douglass

by Frederick Douglass

The Rhythm Section

by Mark Burnell

The Aftermath

by Rhidian Brook

by Stephenie Meyer

The Sixth Extinction An Unnatural History

by Elizabeth Kolbert

by Cormac McCarthy

The Eyes Were Watching God

by Zora Neale Hurston

by James Welch

working on a homework question?

Studypool is powered by Microtutoring TM

Copyright © 2024. Studypool Inc.

Studypool is not sponsored or endorsed by any college or university.

Ongoing Conversations

Access over 35 million homework documents through the notebank

Get on-demand Q&A homework help from verified tutors

Read 1000s of rich book guides covering popular titles

Sign up with Google

Sign up with Facebook

Already have an account? Login

Login with Google

Login with Facebook

Don't have an account? Sign Up