Microsoft Corp.’s billion deal to acquire Nokia Corp.’s mobile-phone business turns the U.S. software giant into a stronger hardware vendor, but also complicates its relationship with Asian device makers such as Samsung Electronics Co.
For Asian handset makers, Microsoft’s decision to deepen its ties with Nokia—reminiscent of Google Inc.’s 2011 move to buy Motorola Mobility Inc.—is the latest reminder that their software partners are also potential competitors, and that could push some of them to work harder on their own software capabilities.
Nokia is by far the biggest supplier of handsets using the Windows Phone operating system, but Samsung, HTC Corp. and other Asian handset makers also sell some devices using Microsoft’s software.
“This acquisition creates a lot of uncertainty for hardware vendors working with Microsoft,” said Canalys analyst Rachel Lashford. While the deal could give Microsoft the ability to tap Nokia’s sales channels and launch Windows-based hardware products in a more timely manner, it could also put the U.S. firm’s relationship with hardware partners at risk, Ms. Lashford said.
Microsoft is acquiring nearly all of Nokia’s mobile business in a $7.18 billion deal. The WSJ’s Juro Osawa tells Ramy Inocencio what the purchase means for the tech world.
In an attempt to ease any concerns, Microsoft Chief Executive Steve Ballmer said in a conference call after the deal announcement that the U.S. company will remain committed to its hardware partners.
Microsoft is the biggest software partner for Asian PC makers such as Lenovo Group Ltd. and Acer Inc., but the U.S. company has little presence in the smartphone market. There are few major suppliers of handsets using Windows Phone other than Nokia, which uses the operating system in its Lumia phones.
Windows Phone accounted for only 4% of all smartphones shipped globally in the second quarter, according to research firm IDC, while Android accounted for 79% and Apple Inc.’s iOS took up 13%.
Microsoft already has a strategic business alliance with Nokia. Before the two firms teamed up in 2011, HTC used to be Microsoft’s closest hardware partner in the smartphone market. Now, most HTC handsets are powered by Android, and analysts estimate that about 10% of HTC’s smartphones are using Windows.
Samsung, the biggest vendor of Android-based devices, also sells some Windows-based products such as the ATIV line of tablet computers.
For Samsung, HTC and other major Asian handset vendors, the option of using Windows Phone could become even less attractive due to Microsoft’s deal with Nokia, said Nicolas Baratte, head of Asia technology research at CLSA.
“In the smartphone market, handset vendors don’t have any realistic alternatives to Android right now,” Mr. Baratte said.
Despite its acquisition of Motorola Mobility, Google has managed its relationship with handset vendors well. Google doesn’t charge them for the OS and makes money through mobile-based advertising and other services. For now, “Android doesn’t limit [handset makers'] ability to make money,” said Mr. Baratte.
Even so, Samsung has been working for years to find software options other than Android. The company has jointly developed the Tizen OS with chip maker Intel Corp., but it hasn’t yet announced any smartphone powered by Tizen.
In an interview with The Wall Street Journal earlier this year, Samsung mobile chief J.K. Shin said Samsung plans to release a Tizen-powered phone in the third quarter, but recent local media reports have said the launch may be delayed.
HTC, meanwhile, is developing a smartphone OS specifically for Chinese consumers, people familiar with the project told The Wall Street Journal last week.
In the long run, Microsoft’s deal with Nokia creates the need for Samsung and other major handset makers to work even harder on their own software, said Canalys’s Ms. Lashford. But creating an ecosystem of app developers has proved to be a huge challenge. Both Android and iOS have roughly one million apps each, created by numerous developers around the world.
Microsoft’s relationship with its computer hardware partners was strained when it chose to release its own Surface tablets last year. Following the Surface launch, Acer Chairman J.T. Wang criticized Microsoft for competing against the Taiwanese PC maker and other hardware partners and throwing the industry into uncertainty, even though he later dialed back his criticism.