Mergers and Acquisitions Happened in the Mobile Industry during 2004-2011 - Research Paper Example

?Corporate Strategy Mergers and Acquisitions Computing and Mobile Devices is one of the fastest growing industries in the world. It is an industry that is experiencing tremendous growth along with cut throat competition. It is not just a competition by using marketing techniques but a competition with innovative products and services. Companies that were market leaders in the segment have been losing market share year on year over other players. (Appendix 1) Technology is the major driving force of this segment. Products that are introduced in the market become outdated within no time as the competitors will launch a better product equipped with advanced technology at a competitive price. Therefore, continuous investment in R & D is very much essential for the sustainability of business in this industry. Those players who do not update the product for the market needs will be laid back and the market will be taken over by the competitors. Some of the major mobile phone device companies in the world are Nokia, Apple, Samsung, Blackberry, LG, Sony Ericsson, etc. While some players have handled the market single handed, some others have depended on mergers and acquisitions. The mergers and acquisitions were either carried on to be stronger to compete in the market or to suppress a potential competitor by acquiring them. This section will deal with some of the notable mergers and acquisitions happened in the computing and mobile industry during 2004 – 2011. Alcatel – Lucent: Alcatel Lucent is a global telecommunications corporation formed by the merger of Alcatel of France with Lucent of USA in December 2006. The merged entity is now called Alcatel Lucent and is headquartered in Paris, France. “The formation of Alcatel-Lucent in 2006 created the world’s first truly global communications solutions provider, with the most complete end-to-end portfolio of solutions and services in the industry.” (Alcatel Lucent, 2011) This was a merger with a clear strategic focus. Both Alcatel and Lucent technologies were having years of experience in the telecommunications industry. The main strategy behind the merger is to form a globally strong player in communication solutions. Alcatel had significant market presence in more than 130 countries including France and other European Union countries. Similarly, Lucent technologies had good market presence mainly in US and many Asian markets. The merger assured formation of a company with one of the widest market presence in the industry. The merger also gave Alcatel access to Bell Laboratories, the R&D facility of Lucent Technologies. Presently, Bell Labs is a subsidiary of Alcatel Lucent. Alcatel was specialized in providing communication solutions to internet service providers and corporates. They are also specialized in broadband networks (fixed and mobile) and other related applications. At the same time Lucent technologies were specialized in providing software solutions and systems to the communication networks. The merger gave Alcatel Lucent an edge over end to end services in the industry. A clear foresight about the stiff competition in the industry is what that drove both the companies for this merger. Nokia – Trolltech: Nokia’s acquisition of Trolltech is another strategic acquisition that happened in the telecommunications industry. The deal was completed in June 2008 when the European Commission unconditionally approved Nokia’s offer for Trolltech. Trolltech, originally known as Qt development Networks is a Norway based software developer. “Nokia describes its acquisition of Trolltech as a way to move its cross-platform software strategy forward and also alludes to the potential for increasing the value of its S60 and Series 40 mobile platforms.” (Paul, 2008) Nokia is one of the largest mobile handset makers in the world. The Finland based company was the market leader until recently when Samsung smart phones overtook Nokia with their Android based products. Nokia’s smart phones are based on Symbian platforms. Trolltech has in depth understanding in open source software. The main intention of Nokia through the acquisition is to strengthen its technology platform. It was in fact a backward integration effort by Nokia. Nokia realized that going forward, in house technology will give them better synchronization of product designs and platforms. Back then, Nokia had started realizing the failure of its Symbian platforms to Windows and Android (though not fully operational in 2008) The strategy behind Trolltech acquisition was to have a fully integrated platform and supporting software developer for Nokia. Nokia has not only aimed at having a platform and software developer but also for an online applications market. The acquisition of Trolltech helped Nokia to establish the OVI store which is a similar offering as that of the Apple’s App Store. But Trolltech as a platform developer failed to reap the expected benefits for Nokia. With the present talks between Nokia and Windows, the future of Trolltech seems to be uncertain. Moreover, Nokia is currently losing its market share continuously for Samsung and Apple. Apple – Siri: Siri is one of the most talked after words since last month when Apple launched its new application Siri. Apple’s acquisition of Siri is the most recent acquisition in the telecommunications industry. Apple acquired Siri in April 2008 and the company expected to flourish its presence in voice application technology. Siri was start up software introduced initially in the App Store. “Apple’s acquisition of Siri is completely in line with Apple’s thinking on mobile search.” (Warren, 2010) As always Apple has the strong intention to surprise its customers with innovative products and product interfaces. The acquisition of Siri was the step to one of their intentions. Apple realized that customers are expecting the device to be more user-friendly and the one that makes the life easier. This is when Apple started thinking about voice –activated search technology. Such technology would relieve the customers of using the keypad to search for information. A better voice recognition interface would help the search easier. Apple wanted to distinguish itself from other voice integrated handsets and therefore acquired Siri for an amount of around $200 Million. Siri’s acquisition was in fact a good decision made by Apple. “Siri is a free virtual personal assistant application for the iPhone that pulls together all sorts of web services and accounts. It uses voice recognition, location information and knowledge of a user’s relationships and history.” (Gannes, 2010) Siri gained immense popularity among the tech freaks. Siri was introduced by Apple on its newly launched iPhone 4S model. But the current buzz cannot be concluded as the ultimate success of the interface. We will have to wait and watch how practical the application is over a period of time. Also, there is all likelihood that players like Samsung and Nokia will come up with similar technologies to compete in the market. Apple’s acquisition of Siri is a clear example for the leverage of technology to gain market share. The moment they understood the potential of Siri to take the market by storm, they acquired it to be embedded into the handset. It was aimed at facing the stronger players like Samsung, Blackberry and Nokia. Joint Ventures and Strategic Alliances Joint Ventures and Strategic Alliances are two methods that are employed by the companies for partnering with one another for better market utilization. The main difference between a joint venture and strategic alliance is that in Joint Venture a new company is formed where the companies formed the venture will have an agreed upon share in the venture whereas in a strategic alliance, the companies just share their technological base for each other’s benefits without the formation of a new company. Joint venture is formed when the partnering is intended for market expansion and the like. But if technology sharing is the main intention, strategic alliance is the answer. Computing and Mobile Devices industry has seen significant number of joint ventures and strategic alliance during the period 2004 – 2011. Many companies have entered into either join ventures or strategic alliances with companies for making a better presence in the market. Some of the most notable joint ventures and strategic alliances during the period are discussed below. Nokia Siemens: Nokia and Siemens have formed a joint venture in 2007 to form the data networking and telecommunications equipment company Nokia Siemens Network. The company is headquartered in Espoo, Finland. The company presently has operations in around 150 countries. The company serves around 600 customers worldwide. Though, Nokia Siemens Networks were focused on creating a better presence in the network segment, recent improvements have shown that the joint venture is failing to create the real impact. Of late Nokia is facing stiff competition from Apple and Samsung. Samsung has already overtaken Nokia as the leading smart phone maker. The diminishing market share is showing impact on the profitability of its joint venture too. As a result of this both the companies have decided to sell the entity Nokia Siemens Networks and have invited bids for the same. Nokia Siemens Networks was an unprofitable business ever since it was formed. Recent reports have shown that they have failed to invite bids too. Now the company is looking for the option of restructuring Nokia Siemens Networks rather than selling the entity. “Nokia and Siemens are each providing €500m to “further strengthen the company’s financial position and set the stage for strategic flexibility, productivity and innovation in areas such as mobile broadband and related services”. (Bryant et. Al., 2011) How well they turn out the company to profit is a matter of time. Nokia – Yahoo: The strategic alliance with Yahoo is one of the most promising ventures for Nokia at present. The alliance was announced in the year 2010. This is a pure strategic alliance that was aimed at both the companies trying to leverage on the other’s technological and customer base. “Both companies see it as a way to grow their respective userbases, with Yahoo hoping to grab onto the 9 million Ovi users out there, while Nokia hopes that Yahoo could provide it a bit of a USA mojo.” (Miller, 2010) Nokia is a global company in terms of their customer base and product offerings. But till now they are not the market leader in US. This is what Nokia aims at achieving through the alliance with Yahoo. Nokia also wants the expertise of Yahoo in getting their OVI mail and OVI chat services to maximum customers. Nokia cannot manage it single handed as they are not specialized in the sector. Yahoo is also having clear plans through this alliance. Unlike Google, Yahoo has lost its focus on maps some years before. They intend to re-establish themselves in maps though Nokia’s OVI powered map services. Together Yahoo will be able to strengthen its navigation services through maps powered by OVI. The integration process is almost complete and the Yahoo maps is already been powered by Nokia. Nokia has integrated its Ovi maps with Yahoo and is branded as ‘Powered by Nokia.’ The strategic alliance will help Nokia to be the largest online navigation provider. Also, Yahoo has integrating the Ovi mail and Chat services to them so that it can be used on select yahoo platforms as well. They have termed this integration as ID Federation. “Together, Yahoo! and Nokia will continue to deliver compelling Internet experiences that address the core needs of consumers, developers, operators and advertisers. The companies will utilize their respective global distribution advantages and brand recognition across consumer audiences.” (Nokia, 2011) RIM – HP: Another notable strategic alliance in the industry is that of Research In Motion (RIM) and HP. “HP and RIM plan to design and launch offerings to increase the productivity levels of the growing number of global mobile employees, enabling businesses to extend the return on their investments in mobility.” (Alto, 2009) Both the companies are focusing on offering better business mobility to the customers. RIM is one of the most renowned companies in the field of wireless solutions worldwide. RIM is one of the most preferred service providers by business class customers. RIM is specialized in services such as emails, phone, SMS, and other internet based applications. HP has the advantage of being the world’s largest technology company. The service and product portfolio of HP consists of printing, computing, IT infrastructure and software. The alliance is aimed at reaching the customers who requires the services offered by HP at the ease offered by RIM. The deal is also aimed at reducing operational cost and increasing productivity of the companies. HP will introduce its cloud computing technology in this strategic alliance. HP Cloud Print, the web based printing solution will help the users with their printing needs anywhere and anytime. Internet access is the only requirement for enabling the users to print their required documents. The document will be printed in their nearest cloud enabled printers. HP is the pioneer in the Cloud Print technology. As such RIM will leverage its expertise in capturing the market share. This cloud print service can be availed by any Blackberry Internet Service subscribers. Another service that will be introduced in the alliance is HP Operations Manager. This service will be provided for Blackberry Enterprise Server. The major driver of this strategic alliance is the increased competition in the mobile phone devices market. Blackberry has lost a major chunk of its smart phone market share for Apple and Samsung. At this time, innovation and better services were the only solution for companies to regain the market share. This move is expected to give Blackberry a better position in the mobile phone devices segment. Key Opportunity The need for technologically advanced products is the key opportunity for the mobile phone companies in the future. Customers require better mobility and more services. They expect all the functions performed on their desktops to be performed during their mobility. Therefore, the key opportunity in the industry is better mobility with best in class services. If the mobile phone companies can utilize this opportunity and introduce the products, it can reap better benefits from the market. Only innovative products will succeed further in the market. This new opportunity in the market will change the nature of industry as a whole. Market will see more strategic alliances in the future. The fate of Nokia is an example that shows that only technologically advanced players can withstand the changes in the market. Nokia was once a market leader but was not able to grow as per the competition in the market. They had very poor interfaces when compared to Apple and Samsung. Even Blackberry lost its market share for stronger players. The future will be driven by Android devices. (Appendix 2) Technologies like Apple Siri will further revolutionize the segment. Currently Siri is a highly distinguishing technology compared to other products. In order to utilize the future market potential, the handset makers will have to introduce products that will make the customer’s life easier. The products should enable customers to perform their functions with the finger tips. From merely a device to make phone calls and send text messages, the mobile phone industry has established itself to be a business, entertainment and computing device for the people. Tomorrow, the customers would want their mobile devices to be their personal secretary. Apple Siri has begun the effort on this end. Making calls and sending text messages will just be a mere function of the device. Regular voice calls will be replaced by regular video calls. Video calling function will be a standard feature on all high end phones as video calling will be one of the most popular calling modes. Similarly cloud computing will be a common feature on the smart phones of tomorrow. Blackberry will have an early mover advantage in this arena as they have already entered into a joint venture with HP for Cloud Print technology on their devices. As per the talks Nokia will change its Symbian platforms to the Windows platform. This is expected to refresh the product lines and market share of Nokia. Whatever the changes be, future is for those devices that are more mobile, more personal and more user-friendly. References Alcatel Lucent, 2011. About Alcatel Lucent. [Online] Available at: [Accessed 18 November 2011]. Paul, R., 2008. Nokia to buy Trolltech will become a patron of KDE. [Online] Available at: [Accessed 18 November 2011]. Warren, C., 2010. What Apple’s acquisition of Siri means for the future of mobile search. [Online] Available at: [Accessed 18 November 2011]. Bryant, C., Wembridge, M., MacCarthy, C., 2011. Nokia and Siemens invest €1bn in joint venture. [Online] Available at: [Accessed 19 November 2011]. Gannes, L., 2010. Why Apple would buy Siri. [Online] Available at: [Accessed 19 November 2011]. Miller, P., 2010. Nokia and Yahoo announce ‘worldwide strategic alliance’ on email, IM, maps, and more. [Online] Available at: [Accessed 20 November 2011]. Nokia, 2011. Nokia and Yahoo to bring integrated web services to millions of consumers around the world. [Online] Available at: [Accessed 20 November 2011]. Alto, P., 2009. HP and RIM Announce Strategic Alliance to Mobilize Business on Blackberry. [Online] Available at: [Accessed 20 November 2011]. Bass, D., 2011. Microsoft is said to pay Nokia more than $1 billion in deal. [Online] Available at: [Accessed 21 November 2011]. Arora, N., 2011. New study shows people using Apple’s Siri don’t really NEED Google. [Online] Available at: [Accessed 21 November 2011]. The Orange Room, 2011. Manufacturer % Growth (year on year) in smartphone sales. [Online] Available at: [Accessed 21 November 2011]. Nokia Windows Phone, 2011. Windows Phone will soon topple Apple iOS: report. [Online] Available at: [Accessed 21 November 2011]. Appendix 1 Appendix 2 Read More