Does Microsoft Corporation (MSFT) Play Google Inc (GOOG) or Apple Inc. (AAPL)?

Can it work?

From a long-term perspective, Microsoft’s push to become a fully integrated device vendor is an interesting one. On one hand, Microsoft’s entire PC franchise has been built through strong partnerships with OEM partners, but on the other hand, in a world with “free” Android, it will be difficult to compete in the more price sensitive markets. My view is that as far as smartphones go, Microsoft will simply go at it alone with the Nokia Corporation (ADR) (NYSE:NOK) assets backed by the financial might of the company. Only time will tell whether Microsoft will gain meaningful share in the smartphone space, but if it can do it, then the upside for investors could be enormous as Microsoft would not only earn the device margin, but a cut from all of the application sales, as well as a continued push of its various services such as Bing.

But what of Nokia? Well, with an extra $7.2 billion in hand, complete ownership of the Nokia Solutions and Networks (formerly the Nokia-Siemens Network), and no more handset division to drag down profitability, I think Nokia becomes a lot more interesting, particularly since during 2012, NSN generated over $1 billion in operating income. I expect that Nokia shareholders will see the dividend reinstated sooner rather than later, fueled by steady, profitable growth on the back of the secular mobile broadband growth wave.

The article Digging Into Microsoft’s Acquisition Of Nokia’s Handset Business originally appeared on Fool.com and is written by Ashraf Eassa.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple, Google, and Intel. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft. 

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