How Nokia Corporation (ADR) (NOK) – Deal Differs From Motorola’s Deal

How Nokia Corporation (ADR) (NOK) – Deal Differs From Motorola’s Deal
<a href="">Hermann</a> / Pixabay

Since Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) announced that Microsoft would buy its devices division, there’s been plenty of debate about whether that’s a good idea. More than one analyst has brought up the topic of Google Inc (NASDAQ:GOOG)’s acquisition of Motorola, and there are some similarities.

How Nokia Corporation (ADR) (NOK) – Deal Differs From Motorola's Deal

However, UBS analysts think the two acquisitions are quite different.

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Surface similarities with Nokia’s deal

Of course Google Inc (NASDAQ:GOOG) acquired Motorola so that it could get into the handset business more directly than just by offering its open source Android operating system. It wanted to compete more directly with the likes of Apple Inc. (NASDAQ:AAPL), but this surface goal wasn’t the main reason Google wanted to buy Motorola.

Instead, UBS analysts Arthur Hsieh, Patrick Chen and Alice Chen say the search giant wanted access to Motorola’s treasure trove of patents. They believe it was Motorola’s intellectual property that interested Google more than the ability to get into the handset business more directly.

Patents are the difference with Nokia’s deal

Like the deal between Google and Motorola, Microsoft Corporation (NASDAQ:MSFT)’s decision to acquire Nokia’s devices division seems to make perfect sense. It wants to get more directly involved in the handset business rather than just offering an operating system for mobile devices. But unlike in the Google – Motorola deal, this may be the main goal because the company won’t be buying all of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s intellectual property.

Instead, Microsoft will buy some and license the others under the terms of the proposed deal. So it would seem that intellectual property is more of a side benefit in Microsoft’s case rather than the main goal, as it might have been in Google’s case.

Impacts to the handset market

The analysts also note that with Microsoft getting more directly into the handset business, it will likely put competitive pressure on the handful of other companies which make Windows Phones. HTC Corp (TPE:2498) makes a Windows Phone, but the handset barely registers as a blip on the radar of the operating system’s market share. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s Lumia line holds the vast majority of the Windows Phone market, and for good reason.

The UBS analysts see some downside to HTC’s valuation because of the deal between Microsoft Corporation (NASDAQ:MSFT) and Nokia.

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