Google Inc (NASDAQ:GOOG)’s acquisition of Motorola Mobility might provide the best insight, though the acquisition is just beginning to bear fruit. Android has still dominated the landscape and the major handset maker isn’t Google Inc (NASDAQ:GOOG). It is Samsung, the Korean conglomerate that has its hand in just about every corner of consumer tech. As it stands it doesn’t look like direct competition is really causing many issues, which works in Microsoft’s favor, although it may be an issue in the future. For what it’s worth, the company’s Executive Vice President of Operating Systems, Terry Myerson, confirmed in a blog post that the company is still interested in licensing Windows Phone to OEM partners and working closely with them.
Another issue is what the partnership can deliver from an earnings standpoint. Microsoft expects gross margins to rise significantly and that the synergies between software and hardware design can help bolster their market share. In their strategic rationale Microsoft points to a $45 billion opportunity in the smartphone space based on 2018 estimates of worldwide smartphone shipments. That’s a huge opportunity, but one that hinges on an optimistic assumption: 15% market share.
To put that in perspective, Apple Inc. (NASDAQ:AAPL) which shipped almost 32 million smartphones in the second quarter, had just 14.2 percent of the worldwide smartphone market. Microsoft’s share, including the other OEMs producing Windows Phones? Just 7.4 million devices for 3.3 percent of the market. Can Microsoft Corporation (NASDAQ:MSFT) pull off a major coup? It may be able to but as it learned from the Surface, it will not be an easy road.
The bottom line
In the end, the success of this acquisition hinges on the company’s ability to continue building on its current momentum. Windows Phone has produced 78% year over year growth and managed jump into third place a feat that many tech companies would love to pull off. If Microsoft can maintain the pace it stands to gain tremendously, but that is a big if. With a CEO change on the horizon and the competitive nature of the smartphone space it is hard to say how much of an impact it will have in the near-term. Long-term, even if it doesn’t reach its lofty target of 15 percent market share, the company stands to gain as long as it has a piece of the pie.
The article Microsoft Doubles Down on Smartphones With Nokia Acquisition originally appeared on Fool.com and is written by Chris Moore.
Chris Moore has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
