On the defensive, Microsoft's hand was forced in Nokia deal

No choice but to rescue Finnish phone maker, or see Windows Phone homeless

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William Stofega, who leads IDC's mobile device technology and trends research, concurred.

"With Nokia's stock price on a downward slide, rumors of a potential acquisition of the company by several OEMs began to circulate," noted Stofega in a Wednesday note to clients. "An acquisition of Nokia by an OEM would have forced Microsoft to engage in an expensive bidding war for the entire company or continue to build a mobile business without the benefit of a hardware platform. Neither scenario would help restore confidence in Microsoft on Wall Street."

All three analysts pointed out that minus Nokia, Windows Phone was dead in the water, as the Finnish firm's handsets accounted for about 84% of all Windows Phone shipments.

Microsoft's CEO Steve Ballmer, who two weeks ago announced he would retire in the next 12 months, acknowledged Nokia's importance to Windows Phone and the defensive nature of the acquisition.

"A very high concentration, over 80%, of the Windows Phone business is already with Nokia," Ballmer said in a conference call with reporters and Wall Street analysts on Tuesday. "And so in terms of evaluating paths that would ensure that we continue to see great Windows Phone devices from the Nokia team and in an attempt to really ask what's the most sensible economic model, it made sense for us to go first party, have our own phones, to ensure Windows Phone presence." [emphasis added]

Microsoft's buy will effectively end any chance that other handset OEMs will keep cranking out Windows Phone smartphones or change their minds to adopt it -- at least until some future point where the OS has climbed out of the cellar -- but Microsoft knew that, and moved anyway.

"IDC believes that key OEM partners such as HTC and Samsung will likely feel slighted, but neither will face significant financial losses if they decide against producing future Windows Phone devices," said Stofega. "Certainly, Microsoft built this calculus into [the] proposed transaction."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at  @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

Copyright © 2013 IDG Communications, Inc.

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