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.

Tech Obsessive?
Become an Insider to get the story behind the story — and before anyone else.
Subscribe today

Uh oh–you've read all five of your free articles for this month.

Insider Premium

$179.95/yr US PRICE

More from Business Impact

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

Want more award-winning journalism? Subscribe and become an Insider.

  • Insider Premium {! insider.prices.premium !}*

    {! insider.display.menuOptionsLabel !}

    Our award winning magazine, unlimited access to our story archive, special discounts to MIT Technology Review Events, and exclusive content.

    See details+

    What's Included

    Bimonthly home delivery and unlimited 24/7 access to MIT Technology Review’s website.

    The Download. Our daily newsletter of what's important in technology and innovation.

    Access to the Magazine archive. Over 24,000 articles going back to 1899 at your fingertips.

    Special Discounts to select partner offerings

    Discount to MIT Technology Review events

    Ad-free web experience

    First Look. Exclusive early access to stories.

    Insider Conversations. Join in and ask questions as our editors talk to innovators from around the world.

  • Insider Plus {! insider.prices.plus !}* Best Value

    {! insider.display.menuOptionsLabel !}

    Everything included in Insider Basic, plus ad-free web experience, select discounts to partner offerings and MIT Technology Review events

    See details+

    What's Included

    Bimonthly home delivery and unlimited 24/7 access to MIT Technology Review’s website.

    The Download. Our daily newsletter of what's important in technology and innovation.

    Access to the Magazine archive. Over 24,000 articles going back to 1899 at your fingertips.

    Special Discounts to select partner offerings

    Discount to MIT Technology Review events

    Ad-free web experience

  • Insider Basic {! insider.prices.basic !}*

    {! insider.display.menuOptionsLabel !}

    Six issues of our award winning magazine and daily delivery of The Download, our newsletter of what’s important in technology and innovation.

    See details+

    What's Included

    Bimonthly home delivery and unlimited 24/7 access to MIT Technology Review’s website.

    The Download. Our daily newsletter of what's important in technology and innovation.

You've read of free articles this month.