Is a Microsoft Corporation (NASDAQ:MSFT) led takeover of Nokia Corporation (ADR) (NYSE:NOK) in the cards? Probably not--with the brightening future of Windows Phones, there's no longer a pressing need for Microsoft Corporation (NASDAQ:MSFT) to buy the Finnish handset manufacturer.
No longer a pressing issue
There was a time months ago when such a deal made sense. Windows was a fledgling mobile operating system, mired in stagnation, and Nokia Corporation (ADR) (NYSE:NOK) was the only partner truly dedicated to the platform. Microsoft Corporation (NASDAQ:MSFT) needed to ensure that Nokia remained committed to Windows. Buying the company was the best way to ensure that.
But times have changed. According to Kantar Worldpanel, Windows is the fastest growing smartphone operating system. Over the last three quarters ended in April, Windows garnered 5.6% of U.S. smartphone sales, up from 3.8% in the previous year.
Windows is also popular among an important demographic--first time smartphone buyers. According to Kantar, of those that bought a Windows phone last year, 52% had switched from a feature phone. With over half of the U.S. market still feature phone owners and many of those expected to upgrade within the next year, Windows is the best positioned to capture that growth.
And while Nokia Corporation (ADR) (NYSE:NOK) is the most important player in the Windows ecosystem today, expect Chinese manufacturers to drive the platform's growth over the long term. Microsoft Corporation (NASDAQ:MSFT) already has relationships in place with Huawei and ZTE in mobile along with Lenovo as a major partner in the PC space. These allies will give Microsoft the scale needed to challenge Samsung's and Apple's dominance.
But, but, but!
Of course there's an obvious counter arguments to my points above. With Nokia Corporation (ADR) (NYSE:NOK) accounting for four out of five Windows Phones sold, Microsoft Corporation (NASDAQ:MSFT)'s mobile success is still heavily tied to the company. Without Nokia, Microsoft's "bright prospects" would turn into a devastating downturn.
But while Microsoft Corporation (NASDAQ:MSFT) needs Nokia Corporation (ADR) (NYSE:NOK), Nokia also needs Microsoft. Yes, Nokia could switch to Android, but doing so would create a scramble to build new software and services around these devices. Good luck trying to sell a bare bones Android handset for a premium price in today's market. Nokia Corporation (ADR) (NYSE:NOK) could delay launching new products until the software is ready, but this would do nothing for Nokia's sales figures in the short term. And for all of this upheaval, would it really result in selling any more handsets?