Microsoft is to acquire Nokia’s device business:

Microsoft Corporation and Nokia Corporation today announced that the Boards of Directors for both companies have decided to enter into a transaction whereby Microsoft will purchase substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services.

Nokia’s Stephen Elop is no longer CEO:

Stephen Elop, who following today’s announcement is stepping aside as Nokia President and CEO to become Nokia Executive Vice President of Devices & Services

The plan is that Elop, together with other executives from his team, will move to Microsoft. This is a circle completed for Elop, who was formerly in charge of Microsoft Office.

Nokia is retaining its patent portfolio, but licensing its patents to Microsoft for a 10 year term. 

Microsoft is acquiring approximately half of Nokia’s business overall, but all of its phones including the low end Asha range.

What are the implications for Windows Phone? One the face of it, the deal makes some sense. Nokia was the only Windows Phone OEM making real efforts to support and establish the platform, and has a large market share within the Windows Phone market. Although Windows Phone is struggling versus the iOS and Android giants, to Nokia’s credit it has established itself as a firm number three, ahead of Blackberry, and done some impressive work especially with the camera element.

Nokia has also managed to push out low-end but still capable Windows Phones at keen prices, and it is this more than anything else that has won it increasing market share. Recently, Kantar published a report showing solid gains for the platform:

Windows Phone, driven largely by lower priced Nokia smartphones such as the Lumia 520, now represents around one in 10 smartphone sales in Britain, France, Germany and Mexico. For the first time the platform has claimed the number two spot in a major world market, taking 11.6% of sales in Mexico.

What will be the effect of the acquisition on the Windows Phone platform and ecosystem? On the plus side, it gives Elop’s team access to more funds and removes any uncertainty surrounding Nokia’s future. If Microsoft keeps the proven team and its design and manufacturing expertise together, this could work.

There are obvious risks though. Without Nokia, Microsoft did a poor job of marketing Windows Phone, and while some of that is down to half-hearted hardware partners, Microsoft was also to blame for poor execution. Now that Nokia is Microsoft, there is a danger that its effectiveness will slip back.

Another question is how this will impact the other Windows Phone vendors, such at HTC and Samsung. Nokia already seemed to be a favoured partner, so perhaps little will change, but it seems unlikely that this will energise the other partners and it may have the opposite effect. The Windows OEMs hate Microsoft’s efforts with Surface (even though it was their own failings that forced Microsoft into the venture) and the phone vendors may well feel the same about Micro-Nok.

There is now no non-Microsoft smartphone vendor for whom Windows Phone is anything but a small sideshow. That could change, but it is not a sign of health.

Whether Nokia was right to embrace Windows Phone rather than Android is an open question; and perhaps it should not have abandoned its Meego (Linux) efforts, but given that it did both, it seems to me that Elop has performed well and was successfully growing the platform, albeit from a small base. Will he be allowed to continue that work at Microsoft, as well as gaining greater control over the software side of Windows Phone whose slow pace of development, it is rumoured, was a source of frustration to Nokia?

Alternatively, history tells that Microsoft can suffocate its acquisitions (remember Danger?).

Personally I like Windows Phone. When I looked at a Samsung Android recently, I was struck by how disorganised and confusing an Android smartphone can be, though impressed by its capability. Windows Phone is decent and I hope it carves out a reasonable market share.

The risks, though, are obvious.