Should Amazon Buy Nokia?

Jacob Steinberg profile picture
Jacob Steinberg

On Friday, many news reports suggested that, Inc. (NASDAQ:AMZN) was working on a new smart phone in order to take advantage of a market that is expected to more than double by the end of the decade. The phone is expected to run on Android, and Amazon is expected to buy a number of patents to form its own patent portfolio in order to avoid being subject to a number of lawsuits as part of the patent war that has been going on for a while. I believe that if Amazon wants to build a smartphone, it should definitely acquire Nokia Corporation (NOK) for this purpose.

Currently, Nokia's market value is around $7 billion (minus $4 billion of cash held by the company) and the company has one of the largest patent portfolios and one of the largest distribution networks in the world. In addition, Nokia has excellent relations with more than 100 carriers from all over the world. Furthermore, the company has factories that are ready for production in multiple countries. In order to set up a similar patent portfolio, distribution network and capacity, Amazon would have to spend a far higher amount than $7 billion. Besides all, buying Nokia would take one major competition out of the market, helping the company's sales.

Unlike what many people think, I don't think the smartphone market is saturated. How can a market with nearly 4 billion potential buyers be saturated with only 3-4 major players? There is definitely room for more players in the market as long as these new players can attract the attention of consumers. One problem is that a company that starts to design, produce and market smartphones from the scratch would have to spend so much time and money that the task becomes almost prohibitive.


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Jacob Steinberg profile picture

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