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(NECN: Peter Howe, Brookline, Mass.) - On the heels of Verizon Communications Inc. putting up $130 billion to buy out its European partner Vodafone’s 45 percent stake in Verizon Wireless, Microsoft Corp. further shook up the wireless world with a $7 billion takeover of Nokia’s handset unit.
Noting the success of Microsoft-powered Lumia 41-megapixel camera phones, Microsoft CEO Steve Ballmer said Tuesday: "Now is the time to build on this momentum and accelerate it further." The Lumia has been a rare hardware success story for Microsoft after its Surface tablet flop – which cost it a $900 million write-down for unsold devices earlier this summer – and all-but-forgotten Zune music player meant to compete with the iPhone.
"The track record that Microsoft has had with devices is checkered," said Venkat Venkatraman, a Boston University school of management professor and academic lead of its information systems digital technology sector program.
Venkatraman says a big unanswered question: What will happen to the half-dozen other smartphone makers that now make Windows-powered phones if Microsoft owns their competitor, Nokia – the same issue Google’s wrestled with in promoting its Android smartphone operating system even as it bought the handset business of Motorola.
"Suddenly, Microsoft is complicating it by bringing one of the third-party companies to be a first-party company, inside Microsoft. So from that perspective, I'm a little bit skeptical" the deal will be a net winner for Microsoft as it tries to promote Windows as a third option to Apple and Android.
Verizon executives have for years made no secret of their desire to get 100 percent control of Verizon Wireless – the nation’s clear number-one carrier with just under 99 million subscribers. Their completion of the deal with Vodafone as the European carrier looks to get cash for acquisitions and Verizon looks to lock down financing at near-record-low interest rates comes as the industry’s seeing much stronger competitive offerings from Sprint, now owned by an expansion-minded Softbank of Japan, and T-Mobile.
"This market is destined to become much more competitive than it has been," said wireless expert Mark Lowenstein of Mobile Ecosystem in Brookline, Mass. Lowenstein said he can envision a Verizon now in full control of its wireless namesake feeling freer to try some big innovations.
"If there is an impact it might be on their landline subscribers in areas where they still offer landline service. I think you might see some innovative bundling of wireless and wireline services in a way they haven’t done before," perhaps including "total broadband" services that give people a combination of wireless, DSL, FiOS, and WiFi access on one plan with one bill.
"Another area where Verizon can be very creative is in leveraging the assets that it has as a cable TV provider through FiOS and its broadband business as well as its wireless businesses, in order to be able to provide t-v everywhere," Lowenstein said, "on television sets, on tablets, on mobile devices in a creative way."
Verizon’s $130 billion buy-out of Vodafone ranks as the third biggest merger-and-acquisition deal of history, topped only by Vodafone’s $202 billion acquisition of German carrier Mannesmann in 2000 and the $186 billion Time Warner-America Online merger.
With videographer John J. Hammann