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September 3, 2013 at 12:59 AM
Ballmer: Microsoft-Nokia purchase idea started taking shape around Mobile World Congress time
In case you missed it, here’s my first-day story on Microsoft’s $7 billion purchase of Nokia’s handset business, which includes parts of an interview I had with Microsoft CEO Steve Ballmer and Nokia Chairman and Interim CEO Risto Siilasmaa.
The story (which is running in the print edition of The Seattle Times today) didn’t have enough space to include more from the interview. So here are more tidbits.
On how long the deal has been in the works:
Ballmer said it began earlier this year when he called Siilasmaa about getting together in Barcelona during the Mobile World Congress in February. Ballmer wanted to discuss “ways in which we might improve our partnership,” he said.
During the meeting, Siilasmaa requested a complete examination all the different forms the partnership could take, as well as alternatives.
“I was probably thinking acquisition at the time,” Ballmer said.
On what Microsoft would gain by owning Nokia’s handset business directly, rather than just partnering with Nokia:
“We’ve been working very well together,” Ballmer said. “But at the end of the day, we’re two companies that need to protect relative value for their shareholders.”
With Microsoft purchasing Nokia’s phone business outright, “we remove any boundaries in agility,” he said.
He gave the example of the Nokia Lumia 1020 Windows Phone. “We had to each be very careful” because each company had other partners that it had to keep in mind.
Plus, “Nokia Lumia Windows Phone 1020 is a mouthful,” he said, laughing. “We can probably do better as a company.”
When asked what name might be used instead, he said, again laughing: “Something like Microsoft Windows Phone” might sound good.
Ballmer said Microsoft has bought the rights to the Lumia and Asha names. (Asha is the name of Nokia’s smartphones aimed at emerging markets.)
He said having one company making decisions on everything from innovations to marketing would make things more efficient, with higher returns.
Microsoft posted a slideshow presentation with more of the company’s thinking on the strategic benefits of the acquisition.
In one slide, Microsoft says Windows Phone’s royalty gross margins, under the current partnership, is less than $10 per unit. In addition, Microsoft pays Nokia to support the platform and invests in the marketing of its Windows Phone. If Nokia’s phone business became part of Microsoft, the smart device gross margin would be more than $40 per unit, according to Microsoft. And the marketing effort could be more focused.