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Nokia
Project Presentation
on
Business Negotiation
Skills
Submitted by :
Group
5
Mashhood Ahmed Raza
(13032)
Sanjay R
(13047)
Rachaita G
(13104)
Titas Debanath
Chinmay Ranbirsingh
(13118)
(13139)
Introduction
Microsoft:
The history of Microsoft began on April 4, 1975, when it was founded by Bill Gates and
Paul Allen in Albuquerque.
Nokia:
Nokia is the worlds leading mobile phone supplier and a leading supplier of mobile and
fixed telecom networks including related customer services.
Nokia is engaged in the manufacturing of mobile devices and in converging Internet and
communications industries, with over 123,000 employees in 120 countries, sales in more
than 150 countries.
Nokia is also a substantial player in the mobile telephony industry, and for a period, it
was the largest vendor of mobile phones in the world.
In 2011, Nokia eventually entered into a pact with Microsoft to exclusively use its
Windows Phone platform on future smartphones.
Issues in Negotiation
Need satisfied: Wanted a profound presence in smart phone market with its own
hardware division.
Microsoft may gain a deeper store of research knowledge as Nokia spent lavishly
on R&D and all R&D staff related to mobile products and smartphones will all
transfer to Microsoft.
Microsoft can now push Skype across its Nokia devices, Surface tablets.
Economic Factors
7.2 billion worth deal, 95% of devices and services net sales.
Legal Factors
Samsung tussle
Taxation row
Time Constraints
Benefits
Nokia starts afresh
Platform wars
Nokias start wont go waste
Microsoft has adequate funding to venture into smartphone business
PRE-NEGOTIATION PHASE:
Objective/Goal of Microsoft:
To finalise the deal and acquire the mobile division of Nokia
Risk Analysis:
Before deal , Nokia has just a 3% share of the smart phone market.
Other risks are regarding the patent issue and the conflict production plants in India and Korea.
Personal Rapport:
From January 2008 to September 2010, Elop worked for Microsoft as the head of the Business
Division, responsible for the Microsoft Office and Microsoft Dynamics line of products, and as a
member of the company's senior leadership team.
Negotiation Climate
Physical Climate (Place):
The initial discussion took place over a phone call between Mr.
Ballmer and Mr. Siilasmaa in early 2011
BATNA
Nokia could sell the handset business to anybody.
Nokia could let the Microsoft deal to lapse.
Nokia could revive its handset business with android system.
Microsoft had partnerships with HTC, Samsung and LG
Negotiation Style
Initial Stage : Competitive Style
Nokia declined having formal deal talks with Microsoft unless it agreed to
a handful of pre-conditions
Both the parties made a team who would go through different potential
options
Tactics Used
Tactics used by Microsoft:
It could let its deal with Microsoft lapse at the end of 2014, and
switch to Googles Android System
Stages of negotiation
Introductory phase
Microsoft first approached Nokia about a deal during the Mobile World Congress
industry conference in Barcelona in 2013.
The prospect of Nokia backing away even slightly from Windows Phone (e.g. by
telling Microsoft it was going to do an experimental Android device) may have
been enough of a catalyst for Microsoft to pull the trigger on the transaction.
Differentiation phase
There was risk that Nokia could have ended up as an acquisition target for another
company, creating uncertainty around the future of their earlier business partnership.
The emotional impact of the announcement and transaction reflects the close association
consumers have with their mobile phones; the fact that Nokia is the grand old lady of the
mobile phone manufacturer world; and the affection and admiration with which Nokia is
regarded, especially in its home market of Finland.
Further to it, Microsoft believed that there is an urgent need of having a mobile handset
device business, if Microsoft wishes to compete with Google and Apple.
Integration phase-
1.
Over all, Nokias directors met around 50 times in person to discuss virtually every
angle of the deal, from valuation to the potential impact on the handset units 32,000
workers.
2.
Much of the discussions were held directly between Mr. Ballmer and Mr. Siilasmaa,
who met discreetly in Helsinki, London, New York and Seattle, among other cities.
3.
The negotiations featured a disparity of styles: Mr. Ballmer was his famously
demonstrative and energetic self, while Mr. Siilasmaa was more reserved and polite.
4.
The talks moved deliberately, with both sides taking time to figure out how the new
structure would work and figure out how to unravel the commercial agreements.
5.
Mr. Ballmer said his conversations with Nokia about an acquisition heated up in the
last several months, but started during a mobile industry conference in Barcelona in
late February.
6.
Late in the summer 2013, talks between the two sides cooled, as the complexities of
the transaction took a toll. They resumed in July, with a broad agreement on the
principles of the transaction reached by the end of that month.
Settlement phase-
Microsoft paid EUR 3.79 billion to purchase substantially all of Nokias Devices &
Services business, and EUR 1.65 billion to license Nokias patents, for a total
transaction price of EUR 5.44 billion in cash.
Nokia retained its patent portfolio and granted Microsoft a 10-year license to its
patents at the time of the closing. Microsoft will grant Nokia reciprocal rights to
use Microsoft patents in its HERE services. In addition, Nokia granted Microsoft
an option to extend this mutual patent agreement in perpetuity.
Microsoft became a strategic licensee of the HERE platform, and will separately
pay Nokia for a four-year license.
Microsoft also immediately made available to Nokia EUR 1.5 billion of financing in
the form of three EUR 500 million tranches of convertible notes that Microsoft
would fund from overseas resources.
The half of Nokia that Microsoft did not buy comprises a valuable and sustainable
business, which will benefit from the injection of capital arising from the
transaction
Shares of Microsoft slid as much as 6% in the afternoon of the deal date, reducing
market value of Microsoft by $15 billion, as investors protested the acquisition of an
underperforming and marginalized corporation that lost more than $4 billion in 2012.
The deal will make Microsoft a big time hardware player, and Nokia will shift focus to
technologies and software. Nokia will focus on its three established businesses, i.e.,
(a) network infrastructure and services; (b) mapping and location services; and (c)
advanced technologies.
It will position Microsoft as number three provider in the smartphone domain. The deal
was a bold step into the future - a win-win for employees, shareholders and
consumers of both companies.
Nokia shares jumped as much as 48 percent in Helsinki as the deal with Microsoft
removed a money-losing handset business and lets Nokia focus on higher-margin
networking gear. The acquisition may solve Nokia's problem of cash.
Nokias mobile telephony patents (10,000 in number) may put a little more financial
strain on Korean Handset Manufacturers (Samsung, LG Electronics, and Pantech).
Nokia focus was on Asian Markets. Microsoft will focus on USA & Europe Markets.
Thank
You