Column: Microsoft and Nokia - the math behind the deal
This morning, Microsoft announced that it would pay EUR 5.44 billion, or $7.17 billion, in cash to buy Nokia's devices and services business and license Nokia's patents and mapping services.
The question, of course, is, why?
Well, Microsoft spells it out plainly in the press release:
Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.
But the bigger news, which isn't receiving enough attention, is Microsoft's disclosure of a dark truth about its Windows Phone business: In its current state, it is never going to make any money.
Way back in June 2010, I wrote an article entitled Microsoft's Mobile Mathematics, within which I did some rough eighth-grade math to determine how much money the company can make in smartphones.