(Tiểu luận FTU) merger acquisition between microsoft and nokia

FOREIGN TRADE UNIVERSITY ENGLISH DEPARTMENT  - REPORT Topic: Merger & Acquisition between Microsoft and Nokia Instructor Phan Kim Thoa (MA.) Group 22 Phùng Cao Anh 1314410020 Nguyễn Thế Cường 1314410035 Bùi Thị Hằng 1314410064 Trần Nguyên Hiếu 1314410077 Nguyễn Văn Long 1314410124 Hà Nội, 2016 Page of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CONTENT INTRODUCTION CHAPTER 1: INTRODUCE TO MERGERS AND ACQUISITIONS (M&A) 1.1 Definition: 1.2 Comparison Merger and Acquisitions 1.3 The types of Merger .4 1.4 The type of Acquisitions CHAPTER 2: COMPANIES OVERVIEW 2.1 Nokia company 2.1.1 Strengths of Nokia 2.1.2 Weaknesses of Nokia 2.1.3 Opportunities 2.1.4 Threats 2.2 Microsoft company 2.2.1 Strengths of Microsoft 2.2.2 Weaknesses of Microsoft .9 2.2.3 Opportunities .10 2.2.4 Threats 10 CHAPTER 3: M&A REASON 10 3.1 Why Did Microsoft Buy Nokia? .11 3.2 Why Did Nokia Sell To Microsoft? 13 Chapter 4: Process and Result of M&A between Nokia and Microsoft 14 4.1 The process .14 4.2 The result 16 CHAPTER 5: ASSESSMENTS 17 CONCLUSION 20 REFERENCES 21 Page of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com INTRODUCTION In the recent years, Mergers and acquisitions are at an all-time high. M&A’s are an exciting time for organizations Deals create a lot of heightened expectations for shareholders, customers, and employees However, what looks good on paper doesn’t come to life all too often In the last 100-odd years, there have been six waves of rapid merger activity in the U.S At the turn of the 20th century, horizontal mergers, which united companies in the same industry (such as steel or oil) and formed monopolies, were common Another wave, this one in the 1960s, saw companies trying to diversify, with mergers that created conglomerates such as General Electric, which had businesses ranging from manufacturing equipment, to television, and even financial services In the 1990s, deregulation and globalization led to another wave, one that was heavily concentrated in the banking and telecommunications industries Many people now think the economy is squarely in the middle of a seventh wave According to data from Thomson Reuters, 2015 is set to be the biggest year ever in worldwide deal-making, with $4.7 trillion in announced mergers and acquisitions—up 42 percent from 2014, and beating the previous record of $4.4 trillion in 2007 However, Mergers and acquisitions should never be taken lightly Not only are you asking two companies to integrate under one corporate mission, but you are bringing together large groups of people with their own personalities, ambitions, behavioural traits and ways of working The complexity ramps up when multiple branch offices, cross-border IT infrastructure and financial regulation are included Without a clear strategy, effective project management and open communication between stakeholder groups, the merger or acquisition will struggle to deliver the desired results In 2013, Microsoft announced it was buying Nokia for $7.2 billion Microsoft Corp bought Nokia's phone business and license its patents and changed its name to Microsoft Mobile in order to increase Windows Phone market share compare to iOS and Android by Apple and Google respectively This is a huge deal and have many effects on the mobile market For this reason, the authors chose the topic: “” to analyze this acquisition and its result Page of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com The research paper provide from general to specific views on Mergers and acquisitions As consequences of that, the paper might be useful and valuable to some extent for international trade in general and Vietnamese Mergers and acquisitions in particular On the basis of logic of solving problems reliant on theoretical framework and actual state, the paper is divided into two chapters: Chapter 1: Introduce to Mergers and acquisitions (M&A) Chapter 2: Companies Overview Chapter 3: M&A Reason Chapter 4: Process and Result of M&A Chapter 5: ASSESSMENTS CHAPTER 1: INTRODUCE TO MERGERS AND ACQUISITIONS (M&A) 1.1 Definition: Mergers and acquisitions (M&A) is the area of corporate finances, management and strategy dealing with purchasing and/or joining with other companies One plus one makes three: this equation is the special alchemy of a merger or an acquisition The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A - Acquisition: When one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition From a legal point of view, the target company ceases to exist, the buyer’s stock continues to be traded - Mergers: A merger happens when two firm agree to go forward as a single new company rather than remain separately owned and operated This kind of action is more precisely referred to as a Page of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com “merger of equals” The firms are often of about the same size Both companies’stocks are sureendered and new company stock is issued in it place 1.2 Comparison Merger and Acquisitions Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded.  In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created 1.3 The types of Merger There are various types of Mergers:  Horizontal merger: - This kind of merger exists between two companies who compete in the same industry segment (say, if McDonald's were to merge with Burger King) - The amalgamation of Daimler-Benz and Chrysler is a popular example of a horizontal merger  Vertical merger: - Vertical merger is a kind in which two or more companies in the same industry but in different fields combine together in business One such merger occurred between Time Warner Incorporated, a major cable operation, and the Turner Corporation, which produces CNN, TBS, and other programming - Vertical merger may take the form of forward or backward merger When a company combines with the supplier of material, it is called backward merger and when it combines with the customer, it is known as forward merger Page of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com  Conglomerate merger: - It is a kind of venture in which two or more companies belonging to different industrial sectors combine their operations An example of a successful conglomerate is General Electric, popularly known as "GE." General Electric, formed by Thomas Edison in 1890, began as a lighting business and has since transformed into a conglomerate that is more synonymous with "general" than "electric." 1.4 The type of Acquisitions Acquisition usually refers to a purchase of a smaller firm by a larger one Sometimes, however, a smaller firm will acquire management control of a larger and/or longer-established company and retain the name of the latter for the post-acquisition combined entity This is known as a reverse takeover Another type of acquisition is the reverse merger, a form of transaction that enables a private company to be publicly listed in a relatively short time frame A reverse merger occurs when a privately held company (often one that has strong prospects and is eager to raise financing) buys a publicly listed shell company, usually one with no business and limited assets Page of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 2: COMPANIES OVERVIEW 2.1 Nokia company Nokia is a Finnish technology and multinational communication company It ‘s headquartering in Espoo, Uusimaa In 2014 Nokia employed 61656 persons all over the world It reported annual revenues of around £12.73 billion by conducting sales in more than 151 countries Being a pubilc limitted liability company, listed on the Helsinki Stock Exchange and NYSE, it became the world’s 274 largest company measured by Fortune Global 500 in 2013 2.1.1 Strengths of Nokia  Brand: The biggest strength of the company is their brand name Many consumers often opt for Nokia more than any other brand because of the reliability, durability, and creativity their phones provide Nokia has experience of 142 years of history for Nokia – Nokia has a fantasic history behind it and it was one of the top brands selling in the market before the launch of Android or IOS Smartphones  Marketing strategy: Nokia has marketing strategies and its thickness, small professional to each poster, always evaluate and listen customer needs to provide different segment product Therefore, Nokia's products are suitable and friendly to each customer  User friendliness – Till date Nokia is remembered with fondness because it was the first mobile phone for many people and it was very user friendly It was durable too  Nokia is top spender in R&D Page of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Research and development is the most important department if you want innovative products – it’s where tech breakthroughs are made So, how much a company spends on R&D should be a clear indicator of how much “innovation” each company has The analysts at Bernstein Research reckons that the Finnish company spent $3.9 billion, or nearly three times as the competitors spend on average  Largest network of selling & distribution It has fantastic distribution and reach across countries  Strong customer relation  Wide range of products for all class  High Resale value compared to other competitors  Durability  Long battery life  User friendly  Global Expansion 2.1.2 Weaknesses of Nokia The next part of SWOT analysis of Nokia is their weaknesses:  Nokia Corporation has very weak presence in the United States’ cellular market Nokia has remained the largest mobile carrier in the world, the brand Nokia is also just behind Google and Coca Cola but in the US market, Nokia has remained a strange name of telephone sales in global consumption There is a survey which indicates that in the area of downtown of San Francisco, there is no one model “senior” of Nokia appeared in stores At its stores telecom AT & T, the most advanced smartphone that Nokia distributed just E71 with full querty keyboard with just 50 USD price Additon, at the Verizon shop, the largest telecomunication company America absolutely no presence of Nokia In Japan, domestic seller such as Panasonic, Fujisu, Sharp and NEC mainly drives the cellular market growth and Nokia has very fragile position  Low sensitivity to industrial changes – they are not very much sensitive and responsive to the new changes to user expectations Some other drawbacks are: Poor designed smartphones; Low performance of smartphones; Poor after-sell service Page of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Slow reaction to the competition – in the growing marketplace, they are very slow to take an initiative to be more competitive 2.1.3 Opportunities After discussing the internal factors of SWOT analysis of Nokia, let’s shift our focus towards external factors:  Growing Mobile Market – the mobile market is growing vastly day by day  Faster growth of demand for smartphones 2.1.4 Threats The final part of SWOT analysis for Nokia is the threats:  Competitors are becoming stronger Samsung and Iphone – Both of them had wiped out Nokia in 2014 and they will again challenge the phone in 2016 as well China mobiles – It has made exact copy of several Nokia phones, literally pushing the phone out of market Cheap & wide range models from various Smartphone manufacturers – Smartphones are the trend right now and Nokia needs to go along with the trend  New entrants are there, there are many new and strong competitors are emerging, so the market is becoming more competitive 2.2 Microsoft company This SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) should provide some insight into how Microsoft’s future might turn out Page of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2.2.1 Strengths of Microsoft  A Huge Worldwide Reach: Microsoft has been producing quality products for over 40 years, and have built themselves a name doing so Their computers and software appear in almost every household, showing their immense popularity With this, they have a great (and often loyal) customer base and a platform for advertising, through their existing products Just look at Windows 10, which they promoted in older versions of their popular operating systems It has already reached over 200 million install Source:https://www.engadget.com/2016/01/04/windows-10-200-million-installeddevices  Plenty of Capital: That Microsoft is 5th when it comes to the world’s largest companies shows just how much money they must have to spend With this, they can adopt much more aggressive marketing strategies and invest more time and money into developing great products  A Good Track Record: With great power comes great responsibility Microsoft may not produce much free software, but they offer plenty of customer support options and have a line of products which generally work as advertised  Strong distribution channels The company works with all the major computer hardware producers such as Lenovo, Dell, Toshiba and Samsung and major computer retailers to make sure computers would be sold with already pre-installed Windows software The company also invested in Dell and Nokia to tighten its relationships with these companies 2.2.2 Weaknesses of Microsoft Although they have a few very important strengths, Microsoft also have some weaknesses, listed below:  High Price Point: When you take into account the fact that there are desktop publishing suites like OpenOffice or operating systems like Linux available for free, you begin to realise how much Microsoft really charges While this allows greater revenue, it certainly deters customers and could be a growing problem  Plenty of Competition: While this will be discussed further under the topic of ‘Threats’, it’s worth mentioning now that Microsoft has plenty of competitors in the technology Page 10 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com space Of the four largest companies above Microsoft on the list which was mentioned early, two of them (Apple and Google) are also multinational technology companies battling Microsoft Plenty of alternatives exist to the products that Microsoft offer 2.2.3 Opportunities  Making the most of their current standings: As mentioned, Microsoft seems to have plenty of money lying around They have a great opportunity to develop the world’s best software with their talented programmers and large chunks of money to invest  Fully harnessing the power of their customer base: Microsoft is widely accepted by customers, so if they can bring some dynamic to the status quo, then there is plenty for them to earn In essence, Microsoft has the ability to convert their existing customer base, who typically pay for expensive products only every few years, into more active spenders 2.2.4 Threats What with all the technology companies out there, there are quite a few threats to Microsoft:  Losing out on new markets: Let’s face it, Microsoft was late for the mobile revolution Companies like Apple saw opportunity in this, and managed to capitalise on it If Microsoft doesn’t manage to stay current, its products will quickly grow out of date, and as a company they will be pushed aside  Static pricing models: Microsoft products are typically big, expensive purchases that consumers only consider every few years Microsoft doesn’t really offer any particularly cheap products, and so lose out on market share Unless they change this to a more modern system, they might lose out to the microtransactions other companies already employ today CHAPTER 3: M&A REASON Microsoft’s acquisition of Nokia’s Devices and Services business looks like it will be the billion dollar plan that pushes Windows Phone into the big leagues In an email to staff Microsoft CEO Steve Ballmer has described the move as “a bold step into the future” and this ‘transformation’, turning Microsoft into a ‘devices and services’ company, is key to the company's continuing Page 11 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com survival, and would be impossible without Nokia There are two questions for us to answer to find out the reason for this M&A 3.1 Why Did Microsoft Buy Nokia? Firstly, Microsoft needed to keep its momentum Recent figures have shown Microsoft’s Windows Phone posting its highest ever market share (8.3%) and become the third-most popular globally Nguồn: statista.com This means that Windows Phone only holds 3.7 per cent of the global market – a tiny figure compared to Android (who currently have a 65 to 80 percent share depending on which data you use) but still a significant amount of growth considering the entrenched ecosystems Microsoft are in competition with Meanwhile, figures note that over 80% of all Windows Phone sales coming from Nokia hardware So if Microsoft want to keep this momentum, small though it is, then assuming direct control of Nokia’s resources was the best way to go Page 12 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Secondly, Microsoft want to unify hardware and software Apple is the best example of this approach to the mobile industry as they keep the production of both hardware and software inhouse This kind of approach has many benefits This benefits developers by creating consistent hardware specifications thus programmers don’t have to code their software to work on many different systems and it boosts security by encouraging users to update to the latest version of the software; and it means that the user-experience is generally more consistent, leading to greater trust in the brand Thirdly, there is a huge potential landgrab for Microsoft Because market for high-end devices becomes saturated, a smart move for manufacturers is to produce cheaper handsets Midrange Lumia devices such as the 520 have been great in attracting first-time smartphone users The handsets are cheap but durable, and Windows Phone has been optimized beautifully to work fluidly even on lower-specced hardware The design language of colourful contrasts, tiles and fonts looks good even on a low-resolution screen and design flaws that might deter powerusers will go unnoticed by those new to smartphones More importantly than this though, the purchase of the larger Nokia brand is perfect for targeting ‘the next billion’ of users to access the web Microsoft purchase also includes a ten-year license to use the Nokia brand on feature phones, and simply by maintaining the Finnish manufacturer’s high standards they will have an easier task of persuading customers to transfer to the Windows Phone ecosystem over the next decade The fourth reason is related to “Halo Effect” By building up Windows Phone though, Microsoft are doing much more than simply giving life to an ailing operating system: they are setting out a clearer path for the whole Windows ecosystem The ‘halo effect’ is often referenced to in tech circles, referring to the cognitive bias that leads us to judge an individual based on our overall impression rather than specific actions Essentially, by giving customers a good Windows experience via their phones, Microsoft are more likely to keep people using their software in other devices This was made clear in a ‘strategic rationale’ Microsoft released to investors after the acquisition The document states how building the success of Windows Phone will help the company to create “a family of devices with integrated services” These include the likes Office, Page 13 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Skype, Xbox Live, SkyDrive and Bing: services which are almost-globally familiar, and that can be pushed to more users via mobile As the world goes mobile, Google and Apple are wresting more and more control away from desktops as their services (everything from Google Maps to the App Store) become dominant forces Buying Nokia not only bought their manufacturing resources but also their mapping services - a key point of entry for mobile users The last reason is competition between Microsoft and their huge rivals Microsoft is facing an ever-increasing competition from tech companies such as Google, Apple, Samsung and others The one thing common all of these tech companies have, is that, they manufacture hardware themselves And, having their own hardware is extremely important That’s why Google bought Motorola – it needed a hardware company That’s the reason why CEO Steve Ballmer was pushing for Microsoft to buy a hardware company And, as it turns out Nokia was the help line 3.2 Why Did Nokia Sell To Microsoft? The next question we should be asking is “why did Nokia sell itself to Microsoft?” It’s a valid question, considering Nokia sells millions of phones around the world and is a multi-billion dollar company But if you are to look at the recent numbers regarding Nokia smartphones sold around the world, then you would know that Nokia is in trouble Nokia’s last quarter sales were down 24 percent compared to previous year The feature phones market, where Nokia has a stronghold also saw a deep decline as Nokia sold 39 percent less phones This shouldn’t come as surprising considering many people are now opting for smartphones – where Apple and Samsung (Android) are dominating the market Nokia needed an exit strategy – and, Microsoft was there to provide it CHAPTER 4: PROCESS AND RESULT OF M&A BETWEEN NOKIA AND MICROSOFT Page 14 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 4.1 The process One of the most influential people in the deal is Stephen Elop, a former employee of Microsoft, became CEO at the independent smartphone-maker Nokia since September 21, 2010 He described Nokia’s platform as “burning” the current development of its own platforms was too slow and introduced Microsoft’s platform was considered the best choice In February 2011, Elop cut 4000 staffs and officially declared the death of Symbian platform to shake hands with Microsoft and use the Windows Phone operating system Justification for action instead select Windows Phone Android, Elop only a single word, which is "the difference" According to him, Nokia can not make a difference because they were slow on the Android platform At that time, the relationship is limited to cooperate to develop a new product: Microsoftsoftware, Nokia- hardware In November 2011, Nokia unveiled the first smartphone running Windows Phone as Lumia 800, followed by advanced model - the Lumia 900 Windows Phone when it is still very poor, not even support dual-core chip, but Nokia also managed to create a certain impression However, only a few months later, Microsoft introduced Windows Phone platform and does not support the previous generation products By this time, people realized, Nokia has nothing more "fish on a chopping board," and move "offending users" of Microsoft is nothing less than to "submerge" Nokia sank into crisis, to buy back the company with the lowest possible prices The partnership of companies was not integrative The difference between their goals led them to waste a huge amount of time and money to develop separate brands Nokia gradually wanted divestiture strategy for handset business Microsoft was interested in diversification, they wanted to enter into a new market with a new product In the period 2011 - 2012, Nokia cut more than 20,000 employees to restructure, sell luxury phone brand Vertu, even selling are headquartered in Finland, then immediately leased back to save cash Nokia reported a loss in the successive of quarterly financial statements, an average of up to a billion dollars per quarter Until the first quarter of 2013, when Nokia has flourishing business, the company is still losing about 150 million euros Page 15 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com In January, 2013, Microsoft first initiated acquisition talks with Nokia However, this talk ends with no agreement because protesting of the Nokia’s shareholder companies still keep the partnership relationship However, Nokia’s financial performance got worse as cash burning out too quickly The cut-throat competition in the market make Nokia was in critical situation and it needed to renegotiate with Microsoft for further support and selling its handset division for cash In September 2013, Microsoft Corporation and Nokia Corporation announced that the Boards of Directors for both companies have decided to enter into a transaction whereby Microsoft would purchase substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services From the time Elop to the position of CEO of Nokia until May 6/2013, its shares have fallen 85% Full 20% of Nokia's market share decline occurred after the Feb, 2011 Page 16 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com In April 25, 2014, Microsoft announced it has completed its acquisition of the Nokia Devices and Services business 4.2 The result According to statistics, Nokia received 3.75 billion EUR for the Device and services business; 1.65 billion EUR for the 10 year non-exclusive patent license agreement Total is 5.44 billion EUR equivalent to 7.2 billion USD from Microsoft Under the terms of the agreement, Microsoft will acquire substantially all of Nokia’s Devices and Services business, including the Mobile Phones and Smart Devices business units as well as an industry-leading design team, operations including all Nokia Devices & Services-related production facilities, Devices & Services-related sales and marketing activities, and related support functions At closing, approximately 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide The operations that are planned to be transferred to Microsoft generated an estimated EUR 14.9 billion, or almost 50 percent of Nokia’s net sales for the full year 2012 Microsoft is acquiring Nokia’s Smart Devices business unit, including the Lumia brand and products Lumia handsets have won numerous awards and have grown in sales in each of the last three quarters, with sales reaching 7.4 million units in the second quarter of 2013 As part of the transaction, Nokia is assigning to Microsoft its long-term patent licensing agreement with Qualcomm, as well as other licensing agreements Microsoft is also acquiring Nokia’s Mobile Phones business unit, which serves hundreds of millions of customers worldwide, and had sales of 53.7 million units in the second quarter of 2013 Microsoft will acquire the Asha brand and will license the Nokia brand for use with current Nokia mobile phone products Nokia will continue to own and manage the Nokia brand This element provides Microsoft with the opportunity to extend its service offerings to a far wider group around the world while allowing Nokia’s mobile phones to serve as an on-ramp to Windows Phone Page 17 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Nokia will retain its patent portfolio and will grant Microsoft a 10-year license to its patents at the time of the closing Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services In addition, Nokia will grant Microsoft an option to extend this mutual patent agreement in perpetuity In addition, Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four-year license Microsoft will also immediately make available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible notes that Microsoft would fund from overseas resources If Nokia decides to draw down on this financing option, Nokia would pay back these notes to Microsoft from the proceeds of the deal upon closing The financing is not conditional on the transaction closing Microsoft also announced that it has selected Finland as the home for a new data center that will serve Microsoft consumers in Europe The company said it would invest more than a quarterbillion dollars in capital and operation of the new data center over the next few years, with the potential for further expansion over time CHAPTER 5: ASSESSMENTS Mergers and aquisitions is a good way to make profits, but is not always successful An important factor to assess if an M&A is successful or not is creating value It's not clear how Microsoft has benefited from its acquisition of Nokia Finally, all the results people can see are: - Nokia – Microsoft has failed to gain a foothold in the smartphones market - Windows Phone and later Windows 10 Mobile have failed to be an alternative to Android and iOS Page 18 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com In the chart, despite of their efforts to spread Windows Phone’s market share, in 2014, the statistic was deemed to be opposite While Android took up 84.6% and iOS 11.9%, Windows Phone only had 2.7%, it means 1/5 to iOS and 1/30 to Android Microsoft has wasted at least $8 billion on its failed Nokia experiment, including the costs of restructuring and severance payments for thousands of employees Microsoft originally hired 32,000 Nokia employees as part of its $7.2 billion acquisition of Nokia's phone business But after one year, Microsoft was shuttering down its Nokia phone business explained by its recent 7,800 job cuts announcement, its restructuring charge (expense) of about $960 million, and impairment charge application of about $7.6 billion to the Nokia phone business In 2016, Microsoft is taking another almost $1 billion hit on its failed Nokia acquisition The software maker is "streamlining" its smartphone business, writing off $950 million and cutting 1,850 jobs Only a small number of former Nokia employees will remain at Microsoft, and the company's consumer phone making days are over We might not ever know the true reasons for Microsoft's Nokia phone business acquisition, but right now it's clear the company has wasted billions of dollars on a failed experiment to try and claw its way back into the mobile market Page 19 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com So, the question is, why this business transaction wasn’t successful? There are main reasons: - Nokia's business and culture are entirely different than Microsoft's, and Nokia is massive Nokia has 35,000 employees, 32,000 of whom are moving to Microsoft Microsoft has 100,000 employees So, "Nokians" will be fully a quarter of the new Microsoft Hardware manufacturing and distribution, meanwhile, is a completely different business than enterprise and packaged software, and integrating cultures like this is famously difficult - The "low end of the smartphone market" is already well-served by Android and supercheap smartphone makers in China and Korea Nokia is still the second-largest handset maker worldwide because of its production of cheap feature-phones Microsoft has said that it wants to go after the low end of the smartphone market feature phone owners who will buy smartphones and this segment is indeed where Microsoft has the best chance of success But this market is already very well served And even Nokia's manufacturing and distribution prowess will not likely be enough to derail the growth of Samsung, LG, Xiaomi, and other cheap smartphone manufacturers, all of which are already building Android phones Futhermore, Even though Windows Phone is a wellregarded operating system, it faced a serious problems when it came to apps Developers don’t want to devote resources to a platform without a significant user base, but consumers don’t want to invest in devices until they can offer a minimum threshold of popular applications Microsoft's Nokia phone business acquisition was always tricky and risky, but it was a deal organized by former CEO Steve Ballmer It has been clear from the start that Satya Nadella, Microsoft's new CEO, wasn't interested in running a phone business Nadella announced a strategy shift away from a "devices and services" focus just a couple of months after the Nokia acquisition finalized, and in 2016 the strategy shifted even further away from producing multiple handsets In the end, Nokia hoped that Windows Phone would make it stand out in a sea of Android and iOS devices — and it did, but not in the fashion it had wanted Instead, Nokia customers watched their once-mighty brand slowly fade into irrelevance, eventually getting consumed by its ill-chosen partner Page 20 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CONCLUSION Mergers and acquisitions all have one underlying motive: to protect or improve the strength and/or profitability of the dominant company in other words, to maximize shareholder wealth Microsoft acquisition to Nokia may solve temporarily Nokia’s financial problem and Microsoft’s ever-increasing competition, but it’s not a successful business transaction in long-term Microsoft shuttering down the Nokia phone business a little over a year into its acquisition might be a good signal that Microsoft is smart enough to cut its losses early enough in order to forge ahead for good In addition, despite the difficulties the company faced leading up to its demise, Nokia are making a comeback with a new smartphone line in 2017 The fact that the deal was bad does not necessarily flaw the strategic plan of Microsoft and Nokia going forward, and it looks promising for both companies in the future REFERENCES Independent.co.uk link (http://www.independent.co.uk/life-style/gadgets-and-tech/features/four-reasons-whymicrosoft-had-to-buy-nokia-8796638.html) Page 21 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Maypalo.com link (http://maypalo.com/2013/09/04/why-microsoft-buying-nokia-is-awin-win-situation-for-everyone/) https://news.microsoft.com/2013/09/03/microsoft-to-acquire-nokias-devices-servicesbusiness-license-nokias-patents-and-mapping-services/ #sm.000146ba0i15gtdcrxssttrqiidxb http://www.theverge.com/2016/5/25/11766540/microsoft-nokia-acquisition-costs https://www.linkedin.com/pulse/microsofts-acquisition-nokia-strategic-blunder-toriolamba http://www.informationweek.com/mobile/mobile-devices/microsofts-nokia-dealanalyzed/d/d-id/1111372 Page 22 of 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ... where Apple and Samsung (Android) are dominating the market Nokia needed an exit strategy – and, Microsoft was there to provide it CHAPTER 4: PROCESS AND RESULT OF M&A BETWEEN NOKIA AND MICROSOFT. .. Result of M&A Chapter 5: ASSESSMENTS CHAPTER 1: INTRODUCE TO MERGERS AND ACQUISITIONS (M&A) 1.1 Definition: Mergers and acquisitions (M&A) is the area of corporate finances, management and strategy... INTRODUCE TO MERGERS AND ACQUISITIONS (M&A) 1.1 Definition: 1.2 Comparison Merger and Acquisitions 1.3 The types of Merger .4 1.4 The type of Acquisitions