Microsoft stock is being hammered by the market after its announcement of a purchase of Nokia’s devices business for $7.2 billion.
After two-and-a-half hours of trading, Nokia is up almost 34% while Microsoft is down 6%.
Why is it like this when, earlier, the market was clamoring for Microsoft to buy out Nokia?
Is it being penalized for its costly mistake with Surface hardware?
Does the market think that Microsoft can not be as good a hardware player as Google and Apple?
Or, is the share price dip more reflective of market’s concerns with Nokia?
Arguably, rumors had been circulating of such a deal ever since an ex-Microsoft executive took over as the CEO of a true-blue Finnish company.
The partnership between the two grew stronger as both found themselves in increasingly vulnerable positions – Nokia saw its leadership vanish within a short period of 5 years and Microsoft saw its stranglehold on enterprise computing under increasing threat from newer technologies, mobile computing and cloud, to name the most critical ones.
In order to play catch up with Google and Apple, Microsoft got Nokia on its side by offering big financial incentives. As a result, Nokia dropped its Symbian OS in favor of Windows Mobile.
Unfortunately, Nokia could never really recover from its late start in the smartphone race. It held on to a leadership position in dumb- or feature-phones for some time before being overtaken by Samsung and lower cost smartphone players like Micromax (in India), etc.
The following chart clearly shows the extent to which Nokia has become inconsequential in the larger scheme of things:
To give more clarity, the top five countries where people still look for Nokia on Google are Bangladesh, Pakistan, Malawi, Zimbabwe, and Benin!
Maybe, the market implicitly knows this inconvenient truth?!