Microsoft outlines its strategic rationale in purchasing Nokia

Microsoft has outlined their strategic rationale behind their purchase of Nokia in a 30 page document, which outlines the details of the near 7.2 billion acquisition.

While this news should disappoint some, its important to understand that it ensures Nokia will be around and continue to do what it does best. This will also allow Nokia to trim its overhead by adopting a licensing model.

Microsoft will also gain a lot from this deal. Nokia is known from producing high quality hardware, and this deal will bring Microsoft Nokia's Devices and Services business unit itself along with some "key" patents. It also grants Microsoft access to Nokia's “broad” set of intellectual property which Nokia will continue to own.

However Microsoft greatest claim from this deal is likely Nokia's patents. It gains over 8,500 patents directly in the deal, ownership of the Lumia and Asha brands and a ten-year license to use the Nokia brand on "feature phones." It also gains from Nokia "assigning" its relevant agreements with companies like Qualcomm, IBM, Motorola and others, streamlining Microsoft’s patent agreements.

Microsoft vs. Apple and Google

The presentation also makes it clear that Microsoft is gunning for Apple and Google. Microsoft hopes to offer a "first rate Microsoft phone experience" for its customers offering an alternative to Google and Apple products.

Microsoft states that it will continue to support its products on iOS and Android devices. Though it sees Apple and Google possibly as root of a foreclosure of "app innovation, integration, distribution, or economics."

How will a Phone business help Microsoft?

Microsoft is primarily a software company, but it is bringing in less than $10 for every Nokia Windows Phone that was sold. The acquisition reverses that monetary arrangement and integrates research and development.

You may also wonder why Microsoft would consider a phone business, when they struggle to sell their Surface tablets. The company goes into depth here as well and even goes on to state outright that part of the reason is to protect the Windows Phone ecosystem by buying Nokia before someone else does. Nokia is 80% of the Windows Phone market, and if another company were to acquire it and decide to make a switch to Android, that would definitely spell the end to Microsoft's mobile platform.

Nokia has done quite well rolling out a number of devices over the past year and that is something that Microsoft will want to keep at the ready if innovation is accelerated like it hopes it will be. Since Nokia's Devices and Services is a well-oiled an established player, it would probably be best for Microsoft to leave it as it is and let it do what it does best, much like it has done with Skype.

Revenue

The biggest motivator for this acquisition would definitely be the revenue. Microsoft is betting that Windows Phone will have at least 15% of the market by 2017. That should equate to roughly $45 billion in revenue. Making that happen will be some 30,000-plus Nokia employees getting Microsoft ID badges along with Stephen Elop as the Executive VP of Devices at Microsoft.

All in all we think Nokia has the best chances of going forward while remaining true to what they are under this new management. This deal also gives Windows Phone the best chance of survival along with the ability to better compete with Apple and Google when it comes to devices and services. Check out Microsoft's presentation in detail below and voice your thoughts in the following comments section.

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