What next for Microsoft?

UK: Commenting on Microsoft's announcement of its intention to buy Nokia's mobile phone unit, Victor Basta, managing director of Magister Advisors, M&A advisors to the technology industry, said:

"Microsoft effectively 'acquired' Nokia several months ago when it entered into a deal to license Windows Mobile to Nokia, making Nokia entirely reliant on Microsoft's software for its mobile future. Nokia's value has eroded progressively since, making the actual deal to acquire the mobile business even more attractive now for Microsoft. In the meantime Microsoft has had the chance to work with Nokia and learn about the business, so this now looks like a safe deal for Microsoft. The burning question, of course, is whether Nokia's gradual erosion - in market share, value and perception - can be reversed.

Microsoft must be betting that with more control they will be able to reengineer the business and gain market share. There is a huge array of challenges in the way though. There is fierce competition in the market and the competitor set in mobility has changed as fundamentally as the PC market changed when Microsoft entered it in the early 80s.

The risk for Microsoft is that this deal is a me-too strategy on the heels of Google's deal with Motorola and a fundamental recognition that Apple's content and hardware ecosystem is the only model that can work. In fact, Microsoft is attempting to 'recreate Apple' by combining its software and hardware under one roof.

This still leaves the strategic question of how Microsoft will be competitive in the mobile space. A ‘me too' strategy, catching up with Apple is not likely to succeed. Microsoft needs its own strategy in the marketplace, and Nokia alone will not deliver that strategy.

Nokia employs 30,000 people too, which will make integration a costly, time-consuming and inevitably blood-letting exercise. This feels like a clean up deal at the end of an era."