Nokia’s Days as a smartphone brand are OVER!.

nokia_lumia_510_01I’ve been saying it for over two years… Nokia will eventually fold into Microsoft. Today it happened. Microsoft has purchased Nokia’s Devices and Services unit, bringing the Lumia lineup under the Redmond roof. The move unites Windows Phone 8 with its biggest hardware supporter, giving the company the integrated mobile offering it’s been looking for with Surface and other devices. And follows in the footsteps of Google acquisition of Motorola.

The purchase comes on the heels of what appeared to be a failed acquisition in June, at which point it seemed conversations had broken off entirely. Now the two come together, in what outgoing Microsoft CEO Steve Ballmer called “a bold step into the future.”

a bold step into the future

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But one of the surprises if the deal includes Nokia lower end phones such as the Asha range, which today do not currently run Windows. Thus showing a clear indication from Microsoft of their ambitions to push further down the pyramid.

Nokia Lumia 1020, Stephen ElopAs part of the agreement, Nokia CEO Stephen Elop is stepping aside; he’s now leading Microsoft’s Devices team.

Elop is back at Microsoft.

This completes ‘holistic’ ecosystem approach by all top three smart phone platforms (Android, iOS and Windows) to have in-house device manufacturing. Something Apple has had from day zero of the iPhone. It would appear that owning the ecosystem is an objective by all. The true test is how this move by Microsoft affects its mobile licensing partnerships, as it could be seen an a cannibalising move against existing partners, mainly HTC, Huawei and Samsung.

Don’t get me wrong, Microsoft now has a strong fleet of in-house hardware, Xbox, Surface and now Smartphones. None of these are complete disasters. Together they could be a strong portfolio to re-inject life into the Windows platform as mobile becomes critical in platform success. In 2012, for the first full year since 2001, personal computer sales are projected to decline. The total number of PC sales will fall from 352.8 million last year to 348.7 million by year-end.

Smartphones are  becoming more affordable, driving adoption in emerging markets and the prepaid segment in mature markets. Of the 1.875 billion mobile phones to be sold in 2013, 1 billion units will be smartphones, compared with 675 million units in 2012. The trend towards smartphones and tablets will have much wider implications than hardware displacement. Software and chipset architecture are also impacted by this shift as consumers embrace apps and personal cloud.

The momentum behind tablets can’t be contained, with sales expected to top the combined desktop and laptop market by 2015.

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That’s according to Gartner, which released a study looking at tablet, PC, mobile device sales. Total worldwide sales of all the devices are expected to hit 2.4 billion units this year and grow to just under 3 billion by 2017.

For $7.2 billion, Microsoft bought its way into the category of “devices and services company.” It gives Microsoft the kind of end-to-end control in mobile that only Apple and BlackBerry have enjoyed (to varying success), and a critical measure of quality control. But can Microsoft succeed where Nokia failed? Was Nokia holding Windows Phone back, or was Windows Phone the problem? The big questions aren’t going away, but maybe now we’ll get answers.

© Scott Bales 2014. All Rights Reserved.