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Microsoft buys Nokia's handset unit for $7.2 bn

Indian market pecking order to remain largely unaffected

BS Reporters  |  Helsinki/New Delhi/Seattle 

Steve Ballmer & Risto Siilasmaa
Steve Ballmer & Risto Siilasmaa

Two years after hitching its fate to Microsoft’s Windows Phone software, Nokia collapsed into the arms of the US software giant on Tuesday, agreeing to sell its main handset business for euro 5.44 billion ($7.2 billion). Nokia will continue to make networking equipment and hold patents. Its Canadian boss Stephen Elop, who ran Microsoft’s business software division before jumping to Nokia in 2010, will return to the US firm as head of its mobile devices business — a Trojan horse, according to disgruntled Finnish media.

Elop is even being discussed as a possible replacement for Microsoft’s retiring CEO Steve Ballmer, who is trying to remake the U.S. firm into a gadget and services company like Apple before he departs. “It’s very clear to me that rationally this is the right step going forward,” Elop told reporters, though he added he also felt “a great deal of sadness” over the outcome.

However, the move will likely be far from a game-changer in the Indian market.

With only 5 per cent of the smartphone mobile phone market in the country operating on the Windows system, Microsoft’s move to upgrade the hot-selling Asha range of affordable smart feature phones manufactured by Nokia to the same platform could fail to achieve the desired results in India.

The top three players in the Indian smartphone space — Samsung (26 per cent share) and the homegrown Micromax (22 per cent) and Karbonn (13 per cent) — have overwhelmingly voted for the Android operating system rather than Windows on their phones. Over 80 per cent of the smartphone market in India is run on Android. Apple, the number five after Nokia, has seen its market share go up from 1 per cent to about 5 per cent in the past six months.

Success in the smartphone segment in India is key to the fortunes of any mobile company. Smartphones account for 20 per cent of mobile phone sales. The share is expected to double in two to three years. In terms of value, it is expected to cross 50 per cent in the same period.

The battle could get even tougher as Apple has decided to get into the lower end of the market.

The US company is looking at launching its phones for under $100 (about Rs 6,700). Google, which acquired Motorola’s mobile business two years back, has already launched Moto X on the Android platform, which will be in the same price range.

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“The deal would not have any immediate impact on the Indian market. But, this gives Microsoft huge scope to tap the tablet and phablet space. If Apple enters the $100 handset segment, the game may again turn out to be Microsoft versus Apple,” said Jaideep Ghosh, partner, KPMG India.

First Published: Wed, September 04 2013. 00:57 IST