Our spring intern Conor Quinn looks at Microsoft as an example of rebranding and its risks.
Last week Microsoft’s acquisition of Nokia’s Devices and Services business was officially announced, sending shockwaves through financial and business newswires. There have been many high value acquisitions among tech companies in the last few years, including Facebook’s purchase of Instagram for $2 billion and its most recent purchase of WhatsApp for $19 billion. With its $7.2 billion dollar price tag, Microsoft’s deal for Nokia is in that same stratosphere. The deal actually took place in September 2013 but was only recently finalized and approved by government agencies around the world. Word on the street is that Nokia will be rebranded as Microsoft Mobile.
For years, Microsoft has struggled in the mobile market coming in at a distant third place behind Apple and Samsung. In terms of operating systems, Windows phones occupy only 5 percent of the global market. Microsoft hopes the purchase of Nokia, a once proud and powerful player in the cell phone industry, will help to boost its market share significantly.
Nokia has been in the mobile phone market since the early 1990s and that experience will be valuable to Microsoft. 1998 saw Nokia as the leader in the industry with sales nearing $45 billion, beating out competitors like Sony, Siemens, and Apple. The company was able to accurately project global demand where others failed. While they missed the boat with Android operating systems, Nokia has shown in the past that they can be innovative and see trends ahead of time in the mobile phone market.
It may make the most sense for Microsoft to keep Nokia staffers and just absorb them in as a new division in their mobile phone line. These employees know the phones best and will allow for a smooth transition – a necessity with the amount of work that needs to be done to catch Apple and Samsung.
Apple and Samsung certainly have a huge head start over Microsoft but this should not discourage the company to move forward with cell phone innovation and production. There are emerging markets and consumers with unmet demands, especially in developing countries. Apple and their success in the mobile phone market in China shows that there are still niches to be found.
It will be interesting to see what kind of impact is had due to the rebranding of Nokia. Will the Windows phone name be strengthened or damaged? The debate that may arise is whether or not Microsoft should have rebranded Nokia as Microsoft Mobile or if they should have kept the Nokia name. Recent studies have shown that there actually is little brand loyalty when upgrading a mobile device. Just two years ago nearly three out of four consumers switched original equipment manufacturers. Options have grown even more since that study, as there are nearly 100 brands manufacturing cell phones currently on the market. Each brand is looking to be next big thing. These trends bode well for Microsoft as they revamp their mobile efforts. Only time will tell if they are successful.
Rebranding is a challenge for any company, big or small, as it innately carries a sense of uncertainty. Even with all the research in the world you can never really know how consumers will react to change.
If you are going through a rebranding process and would like some advice, give us a call.