Analysts: Microsoft's Nokia deal puts pressure on relationships with Samsung, HTC

Microsoft's (NASDAQ:MSFT) decision to pay around $7.2 billion for Nokia's (NYSE:NOK) handset business could put pressure on some of its other major OEM partners, such as Samsung Electronics and HTC, analysts said.

Microsoft CEO Steve Ballmer said on a conference call Tuesday, according to CNET, that he had "talked to a number of OEMs who are more enthusiastic today than yesterday about their investment in Windows Phone." Ballmer said Microsoft will remain committed to its hardware partners. Whether those partners will be committed to Microsoft is another question, however; Nokia already makes more than 80 percent of all Windows Phones sold, as of the second quarter.

A Samsung representative told AllThingsD that the company's official statement on the deal is: "Decline to comment." Similarly, an HTC representative said: "We are assessing the situation and have no comment at this time," an HTC representative said.

HTC and Samsung have each moved toward Google's (NASDAQ:GOOG) Android as their primary smartphone platform. Other Windows Phone licensees have moved on: LG Electronics put its support for Windows Phone on the back burner to focus on Android.

"In the smartphone market, handset vendors don't have any realistic alternatives to Android right now," Nicolas Baratte, head of Asia technology research at CLSA, told the Wall Street Journal.

"This acquisition creates a lot of uncertainty for hardware vendors working with Microsoft," Canalys analyst Rachel Lashford told the Journal. The warned that Microsoft's ownership of both Windows Phone hardware and software could give its devices an advantage over those from other Windows Phone licensees, thus hamper its relationships with other hardware vendors.

In an interview with AllThingsD, Joe Belfiore, corporate vice president of Windows Phone program management at Microsoft, said that Microsoft had showed with its PC business that it can work closely with partners while keeping business plans secret, and that there is plenty of room for other hardware partners. "There's certainly a wide, wide range of innovative things other companies [can do]," he said. Microsoft concurrently licenses its Windows operating system to computer makers while also building and selling its own line of Surface tablets.

Interestingly, similar concerns were raised after Google acquired Motorola for $12.5 billion in 2011. Google promised to keep its Android licensing efforts separate from its Motorola phone selling business.

Nonetheless, it appears both HTC and Samsung could be moving away from licensing altogether. Samsung is moving ahead with its support for the open-source Tizen platform and the Journal reported HTC is considering a smartphone OS specifically for Chinese consumers, signs that the vendors may be hedging their bets against Microsoft and Android.

Consumers across the globe purchased 7.4 million Windows Phone devices in the second quarter, up from 4 million in the year-ago period. That corresponds to 3.3 percent global smartphone market share, Gartner said. That figure leaves Microsoft a distant third behind Android's 79 percent of the market and iOS' 14.2 percent.

"Historically, I've always seen Microsoft as the place where mobile technology goes to die," ABI analyst Michael Morgan told the Journal. "I'm just not entirely sure if this closer owner relationship will allow them to make better phones than under their previous alliance."

"They're making something arguably very well designed, but it doesn't matter," Benedict Evans, an analyst with Enders Analysis, told the New York Times. "I think they're late."

Yet while Microsoft is swallowing Nokia's handset business, it is also apparently interested in BlackBerry (NASDAQ:BBRY), whose board is looking at strategic alternatives for the company, including a possible sale. Bloomberg reported that, according to unnamed sources, Microsoft is "keeping an eye on" BlackBerry, particularly because of its presence in the enterprise market.

For more:
- see this WSJ article (sub. req.)
- see this separate WSJ article (sub. req.)
- see this Bloomberg article
- see this separate Bloomberg article
- see this AllThingsD article
- see this NYT article
- see this The Verge article

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Microsoft to acquire Nokia's phone business for $7.2B
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Analysis: Ballmer's departure from Microsoft puts Windows smartphones, tablets in question
Report: Microsoft plan to buy Nokia's phone biz fell apart

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