International (Business related) Current Event
According to a letter jointly issued by Microsoft’s CEO Steve Ballmer and Nokia’s CEO Stephen Elop and the Microsoft News Center, the board of directors of both companies have agreed that Microsoft purchases Nokia’s devices, services, mapping devices, and issue the company’s licenses and patents.
To achieve the sales and purchase agreement, Nokia and Microsoft entered into an agreement detailing the terms and conditions of the transaction. According to the agreement, Microsoft is required to pay Nokia a sum of EUR 3.79 billion for the services and devices. In addition, the company will pay Nokia a sum of EUR 1.65 billion for the patents. When the transaction is completed, it is projected to cost Microsoft a total of 5.44 billion Euros.
Microsoft’s goal of building a partnership with Nokia was to create a new momentum in the growth of its market shares in mobile devices and services, and to issue Nokia’s patents. The strategy is designed to enable Microsoft rebrand and build a unified market by investing in Nokia’s skilled and innovative workforce to gain from the synergy of a unified marketing approach. The ultimate goal for Microsoft is to strengthen its financial position and create an environment that provides a strong and solid financial position in its future business strategies.
Typically, the sale of Nokia’s devices, patents, and services to Microsoft provides Microsoft with a competitive advantage over rival companies, a strong share growth, improved advertising, rebranding, and an increase in earnings per share.
Global/Regional Economic Implications
The sale of Nokia’s devices, services, and patents could create negative financial implications on Finland’s economy. In the past, Nokia has successively suffered financial setbacks causing a reduction in its market value to 300 billion Euros. However, the market reacted positively to the news of the sale agreement by registering a sharp rise in the value of Nokia’s trading shares.
At the announcement, the company’s shares rose to 48%, it was an indication that Nokia could not collapse in the near future. However, the announcement caused an insignificant effect on the Asian market, while it remained uncertain whether Microsoft could gain a competitive edge by purchasing Nokia’s services, patents, and devices or not.
Your Judgment: Opportunity or Threat for Region/Corporation? Why?
According to my own judgment, the sale of Nokia’s devices, services, and patents could provide Microsoft with a competitive edge in the market, while Nokia, a company which has suffered risks and uncertainties, could relief itself of the risks and difficulties. It is possible for a negative effect to have adverse implications on the performance of Nokia’s devices.
On the other hand, it could provide Microsoft with a competitive edge in the market. Here, Microsoft could be a threat to rival firms, such as Apple, because of its strong position in the current global market. In addition, Microsoft could further threaten Nokia’s existence because of the announcement despite the temporary increase in the value of its shares at the proclamation of the new announcement.
However, Microsoft cannot be a global threat, especially in the Asian market, which is Samsung based. On the other hand, the North American market could provide a space for competition because of the market share Nokia sustainably enjoyed. However, Microsoft should prepare to brush shoulders with Google and Apple.