TOPICS > Economy

Tech Giants Verizon, Microsoft Make Long-Term Bets on a More Wireless Future

September 3, 2013 at 12:00 AM EST
Two big deals are shaking up the tech and telecommunications industry. Microsoft has bought Nokia's smartphone business for $7.2 billion and Verizon announced it was buying out Vodafone's stake in Verizon Wireless for $130 billion. Judy Woodruff talks to Cecilia Kang of The Washington Post about the long-term impact.
LISTEN SEE PODCASTS

TRANSCRIPT

JUDY WOODRUFF: We turn now to rapidly changing world of technology and telecommunications, where two big deals have been announced in as many days.

The latest, Microsoft is buying Nokia’s smartphone and cellular handset business for just over $7 billion. It comes just days after questions were raised about the future of Microsoft when CEO Steve Ballmer announced his intention to retire.

On Monday, Verizon announced that it would buy Vodafone’s stake in Verizon Wireless for $130 billion, making it one of the largest merger and acquisition deals in history.

Cecilia Kang of The Washington Post has been covering these stories, and she joins me now.

Welcome back to the NewsHour, Cecilia.

Let’s start with the later — or the newsiest of the two stories, and that is Microsoft buying Nokia. What is behind this?

Related Video

CECILIA KANG, The Washington Post: Well, what is behind this is, Microsoft has really struggled to really get a foothold in the smartphone market that has really just dominated all of technology in the last six years, since the iPhone was released.

And it’s struggled because its software development has been slow and it has not been able to compete with companies like Apple and Google, which now completely dominate the smartphone market. And this is really where the future of all technology is going.

JUDY WOODRUFF: And why is Microsoft so behind the other two?

CECILIA KANG: Right.

Microsoft is behind for — well, for several reasons, but much of it is the development of its software, its Windows software. But, also, it made a strategic bet about six — before six years ago, actually, before the iPhone was introduced in 2007, where it believed that its ability to extend its dominance in technology from the P.C. market could be done in the same way in the mobile device market by simply licensing software.

But what it saw was Apple really broke out and came out with a new model where — when it introduced the iPhone, and then subsequently the iPad. It showed that it could be — that the real successful model for that company initially was to control the device, to actually produce and control the device, as well as the software that runs on it.

And Microsoft has really struggled to be able to compete with and bring forth a device and software that is as appealing to consumers as Apple has, and subsequently Google with its Android platform.

JUDY WOODRUFF: So do analysts believe this is going to allow Microsoft to catch up in some way or what?

CECILIA KANG: Well, Microsoft is coming really late to the game. Again, the iPhone was introduced in 2007. It’s really only been able to make some waves with its Nokia Windows phone called the Lumia in the last few quarters really. And this is many years out.

So it’s really in a way coming very late, but also it’s admitting that maybe its strategy years ago was wrong. It’s now trying to in some ways mimic the Apple strategy by buying Nokia and developing in-house both the technology hardware and the software. And whether it’s able to succeed in this way will really be difficult.

Just by putting these companies, the developers under one roof may not be able to produce the results that it’s betting it will be able to do, which is to create the next big hit device, blockbuster device.

JUDY WOODRUFF: So, Cecilia, what about the other much bigger deal, and that is Verizon spending $130 billion for Vodafone’s share in Verizon Wireless? What’s the thinking there?

CECILIA KANG: Well, the thinking there — and it’s — and you’re — Judy, the price tag really can’t be underestimated. It can’t be understated; $130 billion really says a lot about the future of the wireless industry.

And not so disconnected from Microsoft’s bid for Nokia, this all has to do with the fact that consumers want access to Internet and they want all their communications to be done on mobile devices whenever they want and wherever they want.

And in the case of Verizon Communications’ purchase of the rest of Verizon Wireless’ stake that Vodafone had, it’s really a sign that Verizon believes that the future will only be more increasingly about mobile access to the Internet. And it wants to be able to have all the revenue that it had been sharing with Vodafone for that in the future, and it also wants to be able to have complete control over all the wireless networks that it has here in the U.S.

And so that was really the reason. It’s a huge price tag, $130 billion. And it really says a lot about how in the future so much more than what we see today will be wireless, cars, machines, et cetera.

JUDY WOODRUFF: So, analysts think this was a good deal?

CECILIA KANG: I think analysts think that it makes sense because it’s a long-term future bet.

Also, Verizon Communications will immediately get 45 percent of the revenues it had been sharing with Vodafone. So there is actually money coming in directly from that deal. And also nobody disagrees that wireless will be any less important than it is today. Everybody just thinks that there’s going to be growth.

JUDY WOODRUFF: Finally, Cecilia, what about the effect for consumers on all this, both the Microsoft move and Verizon?

CECILIA KANG: There may be more direct effect from the Microsoft purchase of Nokia, in that you’re going to perhaps see a third player come out with more devices and more options for consumers.

So, in terms of what you see in your retail shelves, what you’re able to buy online, what kinds of devices, that deal may reap more direct consumer effects.

As far as the wireless market goes and as far as your service carrier and the Verizon deal, there won’t be a direct effect so much on consumers, because really what you’re seeing is that you have two major players here, two major companies, Verizon and AT&T, that dominate, and they only really get bigger.

JUDY WOODRUFF: Cecilia Kang helping us understand it all, thank you.

CECILIA KANG: Thank you.