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Ballmer: Nokia deal opens possibilities for tablets

Microsoft CEO Steve Ballmer
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Microsoft CEO Steve Ballmer

Steve Ballmer, CEO of Microsoft, was quick to stress on Tuesday that the decision to buy Nokia's mobile business opened up exciting possibilities in the tablet and PC space. But one analyst told CNBC that companies which use the firm's operating system might be concerned, as it could now look to ramp up its in-house hardware manufacturing, mirroring Apple and Google.

In an effort to placate Microsoft's device partners, Ballmer told CNBC: "We think our acquisition of Nokia will actually create interesting opportunities for other Windows device makers not just on the phone side but particularly on the tablet and PC side."

"What's good for Windows Phone will be good for the overall Windows ecosystem. And I've certainly had discussions with our OEM (Original Equipment Manufacturers) partners who seem enthused by this announcement," he added.

(Read More: Nokia shares surge 40% on Microsoft mobile deal)

But although Ballmer was optimistic about the opportunities for future partnerships with its OEMs, llkka Rauvola, an analyst at Danske Markets, told CNBC that the companies which use Windows Phone operating system may be feeling a little anxious. Nokia currently accounts for 81.6 percent of smartphone sales that use Windows Phone operating system, but Samsung, HTC and Huawei also have a significant share. Meanwhile, Acer, Asus, Lenovo and Dell are just some of the companies that have opted to include Windows software on its tablets.

"The general direction of competitors is towards a greater integration of hardware, applications, street side stores, app stores and services into one unified offering," he told CNBC, citing examples of Apple and Google.

Rauvola added that he would not be surprised if Microsoft, too, moves in the same direction as Apple and Google, and builds its own smartphones and tablets in-house.

"This could be a negative for those manufacturers who today make tablets and smartphones on Microsoft's platforms. However, this would be no different from Apple's and Google's approach, in our view," he said.

(Read More: Smartphone 'Saturation' Fears for Apple, Samsung)

Microsoft confirmed on Tuesday that it will pay 5.44 billion euros ($7.2 billion) for Nokia's mobile phone business. The initial reaction to the deal was positive from analysts, who said it was a continuation of Microsoft's transition into a devices and services company.

With regards to the tablet space, the recent data certainly looked promising. Research firm IDC has forecast that the market will continue to grow at a rapid pace and by 2017 it expects worldwide shipments to be nearly 407 million units, from an estimate of 227.4 million in 2013.

But despite the deal looking good on paper, analysts have also pointed out that it does not change the broader picture, with Nokia still lagging behind Apple and Samsung in terms of profit and smartphone sales.

(Read more: Samsung seeks 'iPod moment' with smartwatch launch)

Research from Citi into future mobile trends in July also delivered a depressing view of smartphone uptake. Citi argued that penetration for smartphones is between 75-85 percent in developed markets, meaning a saturation point could be reached as early as 2014.

"The smartphone industry is heading for tough times," Rauvola said.

Ian Fogg, an analyst at IHS Electronics and Media, added that there are still fundamental challenges that remain for Microsoft, including third party applications for Windows Phone that fail to match the popularity of Apple's offerings. This deal does, however, confirm that Microsoft are looking in a more "vertical" direction, Fogg said.

By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81

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