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Nokia and Microsoft’s strategic partnership

Nokia and Microsoft plan to work together to integrate key assets and create completely new service offerings, while extending established products and services to new markets. The specific points are listed below:

  • · Nokia would adopt Windows Phone as its principal Smartphone strategy, innovating on top of the platform in areas such as imaging, where Nokia is a market leader.
  • · Nokia would help drive the future of Windows Phone.  Nokia would contribute its expertise on hardware design, language support, and help bring Windows Phone to a larger range of price points, market segments and geographies.
  • · Nokia and Microsoft would closely collaborate on joint marketing initiatives and a shared development roadmap to align on the future evolution of mobile products.
  • · Bing would power Nokia’s search services across Nokia devices and services, giving customers access to Bing’s next generation search capabilities.  Microsoft adCenter would provide search advertising services on Nokia’s line of devices and services.
  • · Nokia Maps would be a core part of Microsoft’s mapping services.  For example, Maps would be integrated with Microsoft’s Bing search engine and adCenter advertising platform to form a unique local search and advertising experience 
  • · Nokia’s extensive operator billing agreements would make it easier for consumers to purchase Nokia Windows Phone services in countries where credit-card use is low.
  • · Microsoft development tools would be used to create applications to run on Nokia Windows Phones, allowing developers to easily leverage the ecosystem’s global reach.
  • · Nokia’s content and application store would be integrated with Microsoft Marketplace for a more compelling consumer experience

In order to better cooperate with Microsoft, Nokia also plan to make some change in the company structure. As of April 1, Nokia will have a new company structure, which features two distinct business units: Smart Devices and Mobile Phones. They will focus on Nokia’s key business areas: high-end Smartphones and mass-market mobile phones.

According to my perspective, I still cannot make sure this will be the turning point for Nokia. Firstly, Nokia had a really bad performance during last three years. Its total return during the last three years was -65%, its total return during last year was -16.2% and its 5-year earnings growth is -17.39%. Compared with other communication companies in the same industry, Nokia’s ability to sell products seems ok, but its ability to earn money is very weak. So Nokia really need to find ways to improve its ability to make money. Secondly, mobile device industry gross margins are expected to come under pressure due to competitive factors. Thirdly, since iphones are widely accepted and other Smartphones such as Gphone is coming up. It is hard for Nokia to compete and stand out in the Smartphone business.

Nokia’s stock price has dropped 13.6% since today’s market opens.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.