Tomahawk, WI 9/19/2013 (BasicsMedia) – Microsoft Corporation (NASDAQ:MSFT) had been heavily reliant on Nokia Corporation for its Windows phones. This was not and has never been a great idea. For a company of MSFT’s stature, relying heavily on one source for its Windows phones was always going to be a dangerous move. If things hadn’t gone according to plan, it would have suffered from consumer backlash and this would not have been good news for its shareholders. This is the reason I support its decision to invest in Surface phones since this gives it two options to rely on now.

 Will MSFT Proceed with its Surface Phones Plans?

MSFT has now seen it fit to invest in making its own Surface phones, something it is doing without the input of Nokia Corporation. I have always believed that MSFT would do better in coming up with a backup plan if the deal with Nokia hadn’t worked out. This is what has now happened with the news explaining its decision to make its own Surface phones. Nokia isn’t a small time player; this is a company which accounts for close to 80% of all Windows phones sales, thus possessing a substantial influence and playing a major role in the MSFT affairs.

 However, there is doubt as to whether MSFT will still go ahead with its plan to build the Surface phones strictly from scratch. Why? Because it has announced that it is buying the devices and services division of Nokia Corporation for a sum of around $7.2 billion. What I see happening as a result of this move, is that MSFT will now incorporate its ideas on how it wants Surface phones to look like on the Lumia phones. Instead of having a purely Surface phone, I think the company will put up its resources in coming up with a phone which is Surface-branded.

 Surface Phones Would Have Been Disaster between Nokia Corporation (ADR) (NYSE:NOK) and MSFT

 It is worth mentioning that the plan to build Surface phones without the input of Nokia would have been a major disaster for the two companies. When the plan was first mooted in October 2012, there were reports that Nokia was quite uneasy with this arrangement. Remember that the two companies had come together in 2011 to work as a team. If MSFT had gone ahead with its decision to build Surface phones on its own, this would have presented dilemma to Nokia, which is purely a phone-making company. It would probably have questioned MSFT’s commitment.

 Nokia Could Have Ended its Association with MSFT

There was always the fear that Nokia would exercise the right it had to end the arrangement with MSFT in 2014, if it so desired. This would have been hastened if MSFT had gone ahead to build its own phone, which would probably have been in direct competition to what Nokia already had in the market. Nokia already has a number of mobile devices which operate on Windows platform, and if MSFT had gone ahead with its plan, there was a real possibility that it would have focused more on its own phones and neglected those of other companies which need its OS.

I still support MSFT’s decision to build Surface phones, since it has to embrace product diversification and not be heavily reliant on only one source.

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