Microsoft acquires Nokia for $7.2 billion to have full control over hardware and software

Nokia has been the face of Windows Phone and now Microsoft has acquired the company's Devices and Services unit for $7.2 billion.

It hasn't been a secret that Nokia has held a special place in Microsoft's heart. Ever since the two companies joined forces with the launch of Windows Phone, Nokia has helped Microsoft's smartphone operating system gain market share in the crowded smartphone world more than any other Windows Phone licensees combined. Microsoft has never tried to hide the fact that it treated Nokia differently compared to its other partners such as Samsung and HTC. It gave Nokia more access to the Windows Phone OS, which allowed the company to customize, enhance, and create exclusive features that can only be found on Lumia smartphones.

Nokia's special treatment also came at a price that Microsoft's other partners did not have to contend with. Nokia vowed to only use Windows Phone to power its smartphones, while other Windows Phone licensees were also two-timing it by using Android to power their handsets. Nokia's commitment to Microsoft was a risky one, as it bet the company's future on a mobile operating system that trailed both Apple's iOS and Google's Android by a wide margin. Despite investors pressuring the company to adopt Android, under the leadership of Nokia's CEO Stephen Elop Nokia remained faithful and continued to only crank out smartphones running Windows Phone.

Microsoft and Nokia have now announced that Microsoft has acquired Nokia's Devices and Services unit for $7.2 billion. The deal allows Microsoft to inherit Nokia's smartphones, upcoming tablets, and an extensive portfolio of patents.

Microsoft and Nokia put together a detailed presentation to address the reasons for the acquisition; here are some of the highlights:

  • To accelerate its share and profits in phones
  • To create a first-rate Microsoft phone experience for its users
  • To prevent Google and Apple from foreclosing app innovation, integration, distribution and economics
  • To avail itself of an outsized financial opportunity fueled by growth in smartphone business

It all comes down to what Apple's philosophy has been since the very beginning, and a quote from Alan Kay that Steve Jobs used repeatedly over the years to explain Apple's stance on creating its own hardware and software drives the message home:

"People who are really serious about software should make their own hardware."

Microsoft applied that quote and just got  $7.2 billion more serious about the future of the company.

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