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— This is the script of CNBC's news report for China's CCTV on September 3, Tuesday.
Welcome to the CNBC Business Daily.
Microsoft and Nokia, two companies that have struggled of late, are integrating their businesses like never before. Microsoft says its buying most of Nokia's devices and services business for about $7.2 billion dollars.
That includes Nokia's struggling smartphone operations, which Microsoft had partnered with before. Nokia and Microsoft had already partnered on smartphones, but previous buyout talks had fallen apart. Nokia's CEO, Stephen Elop, will join Microsoft as part of the deal and has now become an internal candidate in the search for Steve Ballmer's replacement.
Speaking to CNBC, one analyst said that the move was good for Microsoft because it gives the tech giant both control of the hardware and software aspect of the mobile business, similar to Apple's strategy. Have a listen:
[Soundbyte on tape by Bob O'Donnell, Program VP, Clients and Displays at IDC: I think they recognise, as Apple will...I believe in two weeks we're going to see a lower cost Apple II. So I think the whole world is starting to recognise that the $600, unsubsidised smartphone prices are just unsustainable. Microsoft didn't get aggressive, didn't get some gd products phones, but Nokia has got some very nice products, there's no question about it. Their new 1040 with the 41-megapixel camera is an amazing device. They've got a lot of other nice products. They've got a number that are lower end products. So I think we're going to see Microsoft spread itself out across these price bands and aggressively offer solutions. My question is: What about the other guys? What happens to them?]
But is the Finnish phonemaker really the right partner for Microsoft? One analyst on CNBC earlier today said maybe not. Here's why:
[Soundbyte on tape by Trip Chowdhry, Chief, Equities Research, Global Equities Research I don't think so. I think it is too late, too little and probably irrelevant to the industry. We need to see things from an ecosystem perspective. Buying a struggling company with no vision like Nokia, which is yesterday's story, and thinking it could rejuvenate Microsoft into the mobile era, I doubt it. I think it is less to cheer about anything.]
And just in the last few days we have seem some mega M&A deals. First it was Vodafone's $130 bn exit from Verizon Wireless, and now Microsoft's Nokia acquisition. So this set the scene for more M&As in the year ahead? Here's a view from one our analysts:
[Soundbyte on tape by Roger Nightingale, Economist & Strategist, RDN Associates I think it's a continuation, and I think it will go on for some considerable time. Basically, what you have is very easy monetary policy, so there's lots of capacity for banks and others to lend to companies. The companies could use that money to invest in new capacity, but because the economy is so weak, the companies don't want new capacity. What they do therefore, is to use the borrowing capacity to buy up existing companies - competitors.]
Li Sixuan from the CNBC headquarters in Singapore.