Hello,

We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not a subscriber? Subscribe now for unlimited access to online articles.

Brian Bergstein

A View from Brian Bergstein

The Numbers in the Microsoft-Nokia Deal Are Telling

Two deals in two days speak volumes about where the value in wireless technology comes from.

  • September 3, 2013

The price of the deal stood out the most in today’s news that Microsoft is spending 5.4 billion euros ($7.2 billion) to buy Nokia’s devices business, license its patents, and provide financing to the company. Because just a day earlier, Verizon announced it would pay Vodafone $130 billion for the 45 percent of Verizon Wireless that it didn’t already own. In other words, although Nokia touches many more lives (it probably will sell more than 200 million phones this year, while Verizon Wireless has 100 million customers in the U.S.), it’s worth about 1/40th of Verizon Wireless.

It’s a reminder that in the smartphone craze of the past few years, the lion’s share of the revenue has flowed not to app developers or handset makers, but to wireless network operators like Verizon Wireless, whose business is protected by high barriers to entry and who are less subject to the fickleness of consumer tastes. That was captured neatly in the chart below, from our March Business Report on Making Money in Mobile (see “Smartphones Are Eating the World”).

Even Sprint Nextel, which ranks a distant No. 3 among wireless network operators in the U.S., is being sold for three times what Microsoft is paying for the Nokia assets. Of course, as Apple shows, there is a lot of money to be made in making and selling handsets. But in Nokia’s case the battle was much harder, if not impossible, because it didn’t sell phones on the dominant platforms, iOS and Android, which account for 93 percent of the market.

Hear more from Microsoft at EmTech Digital.

Register now
More from Business Impact

How technology advances are changing the economy and providing new opportunities in many industries.

Want more award-winning journalism? Subscribe to Print Subscription.
  • Print Subscription {! insider.prices.print_only !}*

    {! insider.display.menuOptionsLabel !}

    Six print issues per year plus The Download delivered to your email in-box each weekday.

    See details+

    12-month subscription

    Print magazine (6 bi-monthly issues)

    The Download: newsletter delivery each weekday to your inbox

/3
You've read of three free articles this month. for unlimited online access. You've read of three free articles this month. for unlimited online access. This is your last free article this month. for unlimited online access. You've read all your free articles this month. for unlimited online access. You've read of three free articles this month. for more, or for unlimited online access. for two more free articles, or for unlimited online access.