Business strategy changes: Microsoft jumps into hardware business with new Surface tablets – Part 2

Nomura analyst Rick Sherlund revealed his theory on Thursday that Microsoft is planning to provide Pegatron, a Taiwanese hardware manufacturer with the equipment to manufacture the smartphones. However, he also suggested that it might be a reference smartphone for Microsoft’s hardware partners, Samsung, HTC, Nokia and ZTE, to build new Windows phone on the same lines.

Pegatron is currently contracted by Microsoft to manufacture the hardware for its upcoming Surface tablets. However, the company might expand its wing to manufacture smartphone hardware for the US corporate giants.

“Given that they are making their own notebooks – to not depend on Dell and HP – maybe they feel the need to do the same thing on the handset side,” Sherlund said. “Vertical integration is here to stay, and is likely to go beyond notebooks.”

Another conundrum for Microsoft is the existing smartphone market where its mobile operating system is having difficulty finding a strong footing. The strong contracts with Samsung, HTC and above all Nokia have born little fruit for Microsoft in terms of market share.

Sherlund anticipates that an acquisition is in order. Nokia is facing troubled times in both phone sales and capital market. Its share price fell 4.8% on Thursday to $2.38, bringing the overall market capitalization to a mere $8.9 Billion.

This makes way for Microsoft to buy the Finnish company out, even at current value. After all it acquired Skype for $8.5 Billion, which is merely a software developing company. Nokia’s purchase on the other hand will have multi-tier benefits for Microsoft.

The Nokia buy-out will let the company dwell on cash in the international market. On the other hand, Microsoft will have a free hand in making new Windows Phone handsets. Nokia still leads the overall mobile phone market and its goodwill tuned in a smartphone way will bestow new life to Windows Phone.

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Posted by Usman Khalid on Jun 23 2012. Filed under Sci-Tech. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.