Microsoft-Nokia deal: Much ground to cover?

Global - The Microsoft purchase of most of Nokia's assets has synergies, but there remains much to ground to conquer for both brands struggling to get on top in a new smartphone world.

The surprise deal came as big news earlier yesterday, as Microsoft announced it would buy all of Nokia's devices & services, patents and mapping services for US$7.2 billion. Details of the deal here.

Perhaps one hopeful sign for Nokia since the news broke is its 38% rise in shares, though it is a far cry from its top prices in back in 2000. On the other hand, Microsoft shares fell 6% to $31.40 in early U.S. trade.

Questions arise

Firstly, while there are synergies to the deal, can it really take on smartphone leaders Samsung and Apple?

One thing to note is that Nokia is still the world's No. 2 mobile phone maker behind Samsung, though it is not in top five in the smartphone market.

Obviously there's quite a way to go in that market, but at least operationally, this will give Microsoft and Nokia a big leg up. "Operationally the move makes commercial sense. Despite the US$7billion outlay, Microsoft will need no convincing of the benefits of economies of scale and supply chain integration that deliver Samsung and Apple such a competitive advantage," said Graham Hitchmough - regional director, ASEAN, The Brand Union Singapore.

The success of both is now inextricably linked with turning Windows platform into a truly credible and desirable platform for consumers, continues Hitchmough.

"Ultimately, this is just another inevitable step in the consolidation of the category into the hands of a few dominant players and operating systems and behind those brands that can offer the seamless convergence and multi-device content creation and delivery that consumers crave," he said.

The Nokia brand - What happens to it?

This deal will give Microsoft end-to-end control over the Nokia brand, Lars Voedisch, principal consultant, MD, PRecious Communications pointed out.

But it looks like this is a point of concern for Nokia loyals, who seem suddenly sentimental about losing the brand's essence. According to a Forbes article, speakers at Nokia’s press conference stressed their own emotional relationships with Nokia - being "a giant that has spent more than a century as Finland’s most recognizable brand."

Despite this, Microsoft has said Nokia will retain control of the brand. What are the next steps for the brand?

The consumer

The next question is if the deal results in anything for the consumer at all. "While this may deliver back end synergies, it remains to be seen how this will impact the most important piece in the jigsaw - the consumer. Can they face the Android juggernaut? Or even Apple's brand appeal?" asks Sandeep Khanna, founder and CEO of Karma Asia Consulting, and also ex-Nokia marketer.

Melding corporate cultures

Another point of consideration will be if both corporate cultures will blend well. "Even though Nokia was led by an ex-Microsoft person, it still retained its independence. Now, being under the Microsoft umbrella, it will be more directly driven by Microsoft beliefs and values. Success in mobility requires inventiveness and speed, both of which Microsoft has not demonstrated too well thus far," said Khanna.