Summary: Microsoft's acquisition of Nokia is aimed at building a devices and services strategy, but the joint company won't take the same form as Apple. 
 
 Microsoft has been working on its evolution into a devices and services company, away from the services business it has traditionally been, for several years now with limited success. 
 
 Its acquisition of most of Nokia is the latest acceleration of that strategy — to move further away from the moribund world of the beige desktop and towards the sunlit world of smartphones and tablets. 
 
 Owning the desktop (via Windows) and building additional services on top, like Office or search, has been vital for Microsoft's strategy until now, so as our interest shifts from the desktop to the tablet or smartphone it's essential to Microsoft's broader business (even Azure) that it can retain that connection in some form. To be a winner in the business market it also has to be a winner in the consumer market, something that wasn't the case a decade ago. 
 
 As Microsoft's own presentation about the deal, announced on Monday, notes: "With the consumerisation of IT user matter at both home and work... We cannot risk having Apple or Google foreclose app innovation, integration, distribution or economics." 
 
 Nokia lashed itself to Microsoft's mast after losing out to iOS and Android in the smartphone market share stakes and with the limited success of the Lumia range so far enough to keep interest in Windows Phone alive, most analysts are seeing a certain amount of inevitability to the acquisition, even if they are split on what its biggest implications are. 
 
 Forrester mobile analyst Charles Golvin said the steadily diminishing investments by other Windows Phone licensees has left Microsoft with just Nokia as its standard bearer and added Microsoft now appears "poised to adopt a vertically integrated strategy more akin to Apple's". 
 
 But he said Microsoft's challenge remains how to unite the myriad services and brands — Windows, Nokia, Live, Surface, Xbox, Bing and more — into a cohesive experience that will command and cement customer loyalty. 
 
 "That's a tall order and one that should weigh strongly on the board's choice of a new CEO," he said. 
 
 Richard Holway, chairman of analyst TechMarketView, said given that Microsoft paid $8.5bn for Skype in 2011, the price it is paying for Nokia "seems extremely reasonable". 
 
 However, he added: "Our only 'surprise' now is the timing of the announcement. For such a big deal to come just days after Ballmer stood down seems mighty strange." 
 
 For Holway, there is also an opportunity for the enlarged Microsoft to step up its business mobility efforts: "There is undoubtedly a market opportunity for the creation of a provider of mobile solutions for the enterprise. Taking Office onto various mobile platforms. Providing secure emailing in a sector once occupied by BlackBerry." 
 
 But such a move carries its own risks — Microsoft's success has been build on being hardware agnostic and persuading device manufacturers to support it. Already its move into the tablet market with Surface will have unsettled its manufacturers which have struggled to come up with convincing form factors to tackle the decline of the PC. If Nokia's rumoured tablet appears too, this will further complicate Microsoft's relations with these partners who are essential for the success of Windows 8 (as well as Office and other products). 
 
 But, as Holway points out, "on balance, Microsoft needed to make a bold move into mobile. Not doing so would mean certain terminal decline. This way at least holds out some chance of survival." 
 
 Carolina Milanesi, research vice president at analyst Gartner, said by buying rather than just partnering with Nokia, Microsoft gets deeper integration, the benefit of its patents and removes any risk of Nokia either going Android or being acquired by someone else. 
 
 But success against iOS and Android will depend on how the companies integrate. 
 
 "Nokia benefits from higher R&D spend as well as more marketing budget. Microsoft benefits from a good relationship with carriers, good direct channel presence in emerging markets, the potential of going after more aggressively to the business market," she told ZDNet. 
 
 But for Milanesi, business is a secondary concern, even if it is an attractive target where Microsoft, and to a less extent Nokia, have experience: "First and foremost it needs to be about consumers. Enterprise are certainly a target especially considering the state BlackBerry is in but consumers make or break a phone vendor today." 
 
 From Milanesi's point of view, emerging markets need to be a longer term target for Microsoft — but the battle needs to be won in the mature markets first. 
 
 For Forrester principal analyst Thomas Husson, Nokia adds to Microsoft's developing market strategy. It's looking increasingly likely that the US and western European smartphone market is reaching saturation, so that most growth will come from emerging markets. Here Nokia's Asha devices could play a neat role as an 'on-ramp' for consumers buying their first smartphone. Tied in with a revamped tablet strategy this could open up a new front against Android in particular. 
 
 But Husson cautioned: "This is going to be a long journey. In some countries, Windows Phone 8 market share is now above five percent and close to 10 percent. It thus still offers a limited reach for developers and marketers. 
 
 "Nokia is indeed still massivley popular in some emerging countries but competition is very high with Far East manufacturers and low-cost Android devices. I think it will depend on Microsoft's new strategy for emerging markets beyond just mobile phones." 
 
 All of this shows the number of competing — and occasionally contradictory — demands upon Microsoft's management. 
 
 As the incumbent player in a fading market, Microsoft has a take into account those differing requirements as it tries to build for the future. For example, balancing Microsoft's business customers against the need to get into consumer tech, the need to build its own hardware business against the need to keep manufacturers onside, and building up a mobile business while protecting its PC heritage. 
 
 It's easy to look at Apple's integrated hardware and software model and the rich ecosystem that sits around it, but it's much harder to emulate. 
 
 Global coverage: Nokia Interim CEO: Microsoft deal makes us stronger | Even with Nokia devices, Microsoft wants to license Windows Phone to other makers | Does its Nokia buy thwart or fuel a possible Microsoft break-up? | Microsoft shows how to flush decades of Nokia goodwill away | Microsoft gets less than $10 per Windows Phone unit | Microsoft-Nokia deal: Reaction from the Twitter trenches | Elop drops Nokia CEO role to lead devices team under Microsoft deal 
 
 Further reading ||||| Microsoft is buying Nokia's cell phone business and licensing its patent portfolio, according to both companies. 
 
 In 2003, Nokia's cell phone market share exceeded 35%. That same year, its phone business alone posted an operating profit of 5.48 billion euros. Today's sale price, which includes 1.65 billion euros in patents, is just 5.44 billion euros. It's been a rough decade. 
 
 Nokia's cell phone collapse has been a spectacular one. The Finnish giant dominated the dumbphone era after Motorola, another faded star that recently fell into the hands of a comparative upstart. But it was blindsided by Apple, then deprived of a chance to regain its footing by an even more aggressive Google, which followed close behind. 
 
 The story, in hindsight, is simple: Nokia did not have a truly compelling smartphone ready when a large segment of the developed world was first compelled by smartphones. Whether this was the result of complacency — Nokia was, in the mid-2000s, the leader of the niche smartphone category — doesn't matter now. 
 
 Nokia's miscalculations became impossible to ignore in 2008, the same year Microsoft decided, internally at least, to scrap its ancient and inadequate Windows Mobile platform in favor of something entirely new. Under these circumstances, it's easy to imagine how a sort of camaraderie might have emerged at the time, or at least a mutual sympathy. Certainly a shared interest: to break back into the market from which they had been unceremoniously expelled. 
 
 During the next two years, while Microsoft readied Windows Phone 7 and Nokia floundered on, the seeds of Sunday's deal were sewn. A chastened Nokia was a natural partner for the tardy but determined Microsoft; it needed a software solution and Microsoft needed help with hardware. The 2009 vision of 2013 renders clearly: Two giants, united after some missteps, regain their rightful place. By 2010, when the head of Microsoft's Business division left to take the helm at Nokia, the gears were moving. Many at the time wondered if Stephen Elop's time at Nokia would be spent grooming the company for purchase — a foreigner in all possible ways, he began his time at the company with a memo rightly but offensively declaring Nokia's proud platform a failure, and quickly pledged the company's commitment to the still-tiny Windows Phone. It felt like a radical about-face, but no matter: Nokia and Microsoft were going to save each other. 
 
 Now, with Elop returning to Microsoft after a job well done — well, a job, done —that plan has come to fruition. The only problem is that there's little left to save. Windows Phone has barely dented the now much larger smartphone market. Nokia hasn't had a Windows Phone hit. This incongruity — between a successfully executed, slyly strategic long-term merger plan and a much grander, more general sense of failure — might explain Microsoft's deeply strange and somewhat sad stated goals for its Nokia acquisition. 
 
 Microsoft' s "Strategic Rationale," titled "Accelerating Growth," is a disjointed and bizarre document. It manages to sound both insane and uninspiring, outlining modest goals that still sound unrealistic. 
 
 For example, it lays out a plan to pull in over $45 billion dollars in smartphone revenue by 2018. But it plans on doing this by securing just 15% of the projected global smartphone market — not exactly a world-beating plan, keeping in mind the time frame. Consider: 2018 is five years away. Five years ago was the year the App Store first opened. ||||| In a surprising move early Tuesday, Microsoft announced that it would be acquiring Nokia's devices and services division, effectively making the Finland-based phone maker a first-party hardware manufacturer for Windows Phone devices (and their related services). Stephen Elop will step aside as CEO of Nokia and return to Microsoft as head of its devices team — this all on the heels of the recent announcement that Steve Ballmer would step down as Microsoft CEO within the next 12 months. 
 
 The Verge had a chance to speak with Steve and Stephen — as well as Nokia board of directors chairman Risto Siilasmaa — about the massive transition. Ballmer was particularly talkative, though he sounded weary, either from jet lag or a very long month. However, the current CEO wouldn't give up details on whether Elop was a prime candidate for the top slot at the company (as many have speculated). "Our board is going through a process open to internal and external candidates. It's a process that they wanted well-known so they could consider everybody, internally and externally. Stephen Elop happens to be going from external to internal, but our board will consider everybody. They will do it in private — that's the right way for the board to conduct its business." 
 
 The deal was in place before Ballmer announced his retirement 
 
 According to Ballmer, the deal was in place before the public announcement of his plans to exit the company. "Before I announced my plans, shortly before, I called Risto because I wanted him to understand that the transaction was important to us despite my plans, that it was consistent with the strategy of Microsoft and our board. It wasn't my action, and I wanted them to know about it before we finalized this deal. I talked to Stephen Elop about it, everybody remained enthused about the deal and about Stephen joining Microsoft, so that's all happening, and independently our board will go through with the succession activity." 
 
 On the transition itself, Ballmer said he felt this was all part of a longer plan, hinting that perhaps the first few years of a tight partnership with Nokia were a trial run for the deal today: 
 
 "I wouldn't say this was always in the cards. Over the last few years we have thought about our possibilities and strategic options to make sure we had success in phones. I would say I was going through a fairly diligent examination of that at about the time Nokia decided to take a look at opportunities two and a half plus years ago ... And we leapt at the opportunity to form a strategic partnership, we invested in that partnership, as has been well documented. We love the partnership. 
 
 "And yet by the early part of this year it was clear to me that perhaps acquisition would be a way to accelerate. I called Risto right after the first of the year sometime in January, early February. We met at Mobile World Congress. He wanted to make sure we exhausted all possibilities since we were going to be partners in any event, whether we did a deal like this or had a variety of other modifications to our operating partnership. I think that was a valuable exercise in terms of really identifying what are the key things for us to do to really accelerate our partnership. 
 
 "And I think we are better in announcing this deal on both sides for having gone through that exercise. But ultimately this is where we landed." 
 
 Ballmer added that the company is not just interested in the hardware business, but deeply invested in Nokia's services as well. "People will focus in on the phone side. I think it's as important that we were able open up a set of innovation possibilities, working with Here location services — which we are not acquiring. But the way in which we formed a deal where we could do more innovation around building off of the great core technology and data assets at Here is also an important part of the deal today. We look forward to being one of the big customers of Here. 
 
 "Nokia will be a company that goes on, and is in the business of network infrastructure, mapping, advanced technologies. But the team that we acquire from Nokia … Stephen will lead the Microsoft devices efforts and the Windows Phone will be the anchor tenant in terms of volume of our first-party hardware. And of course that’s the Lumia product line." 
 
 "We're not naive about the amount of work that we have in front of us." 
 
 It's unclear how ownership of Nokia's hardware division will allow Microsoft further agency or purchase when it comes to gaining ground in the phone market, but Ballmer clearly thinks the acquisition makes the process simpler — and can lead to deeper market penetration. "I think we have done good work. We're not naïve about the amount of work that we have in front of us. The key is to drive volumes. Driving volumes will activate the software and the hardware ecosystem. We do see an ability to speed our agility in hardware and software innovation. We do think that making the brand and the product line simpler and easier to acquire and being able to invest with greater agility should do a lot to help us continue to improve our market-share and position, which certainly will help our apps." 
 
 Ballmer even lightly broached the topic of a struggling ecosystem on the software side. "And we do know and are focused in on, in every way, shape and form, addressing both the app side of the ecosystem as well as the operators, with whom Nokia has actually build phenomenal relationships. I think they, so far, have been uniformly enthusiastic about our ability as one company to invest even more successfully in Windows Phone." 
 
 "We actually have an opportunity to create better opportunities for OEMS." 
 
 As to whether this move threatens partners that Microsoft has been working with in the phone space, Ballmer was predictably upbeat — though it's hard to imagine HTC and Samsung are feeling particularly warm about their Windows Phone offerings at the moment. "We actually have an opportunity to create better opportunities for OEMS," Ballmer said. "The number one thing that it takes to create opportunities for OEMs is a large market. And our first party in phones will blaze the trail, and perhaps as importantly having phone be a healthy part of the Windows ecosystem will help the OEMs, the many OEMs we have who are focused on tablets, PCs, and All-In-Ones, etc." 
 
 "So both on the phone side, and it particularly helps our OEMS on the tablet and PC side." 
 
 Whether or not this ultimately helps Microsoft? Well, that's a drama yet to play out. But Nokia stock is trading up over 45 percent in Helsinki a few hours after the acquisition was announced. ||||| 1 of 5. Jekaterina Kapanen (R) leaves the Nokia mobile phone plant, after Nokia's CEO Stephen Elop's statement that was relayed by video link to employees in Nokia locations around Finland, in Salo, south-western Finland, June 14, 2012. Loss-making Finnish cellphone maker Nokia plans to cut another 10,000 jobs globally in its biggest revamp in recent history, while it warned the second-quarter loss from its cellphone business would be larger than expected. The cuts, which include the closure of Nokia's only plant in Finland, bring total planned job cuts at the group since Elop took over as chief executive in 2010 to more than 40,000. 
 
 PARIS (Reuters) - Nokia plans to cut 10,000 more jobs, bringing the total to one in three staff, as it loses market share to cellphone rivals Apple and Samsung and burns through cash, raising new fears over its future. 
 
 In a second profit warning in nine weeks, Nokia said on Thursday that its phone business would post a deeper-than-expected loss in the second quarter due to tougher competition, which it expected to continue. 
 
 Once the world's dominant mobile phone provider, Nokia was wrongfooted by the rise of smartphones and is struggling to keep up with Apple, Samsung and Google. It is also losing market share in cheaper, more basic phones. 
 
 Chief Executive Stephen Elop is placing hopes of a turnaround on a new range of smartphones called Lumia, which use largely untried Microsoft Corp software. But Lumia sales have so far been slow, exasperating investors who have seen its stock crash more than 70 percent since it announced the software switch in February 2011. 
 
 "The job cuts and profit warning underline the seriousness of the challenges Nokia is facing, particularly in light of the eye-watering competition from Apple and Samsung," said Ben Wood, head of research at CCS Insight. 
 
 Nokia, whose cash position is increasingly scrutinized by investors, also said restructuring-related cash outflows would be around 650 million euros in the remaining three quarters of 2012 and around 600 million in 2013. 
 
 With the cost of Nokia's debt rising, the most bearish of analysts in a Reuters poll last month said the company could even be at risk of default if it fails to slow its cash burn. 
 
 Over the past five quarters, the onetime darling of mobile telcoms has eroded its cash pile by 2.1 billion euros - a rate that would wipe out its entire 4.9 billion reserves in a couple of years. 
 
 Analysts at JP Morgan said on Thursday they expect operating losses, combined with restructuring outflows, to leave Nokia with 1.63 billion euros cash at the end of next year. 
 
 "This is not a comfort zone for a company as large as Nokia," the analysts said. 
 
 Nokia's five-year credit default swaps (CDS) were at a new all-time high of 933 basis points on Thursday according to Markit. This means it costs $933,000 annually to buy $10 million of protection against a Nokia default using a five-year CDS contract and implies a default probability of 55 percent. 
 
 Bernstein analyst Pierre Ferragu said he expects the company to have minimal net cash position at the end of its restructuring. 
 
 "We therefore see continued potential downside to the recent stock price and maintain our underperform rating," Ferragu said. 
 
 Shares in Nokia were down 16 percent to 1.87 euros, below the psychologically important 2 euros mark, not seen since 1996. 
 
 Analysts have said that even with the dramatic fall in the share price, the worsening outlook made it hard to judge how much lower the shares could go. 
 
 "I won't comment on the stock price anymore, since it's been seen over and over, that there is no definitive bottom," said Evli analyst Mikko Ervasti. 
 
 "People are worried over Lumia sales. I think expectations for the third quarter will be cut," said Nordea analyst Sami Sarkamies. 
 
 The 10,000 job cuts, which include the closure of Nokia's only plant in its homeland Finland, bring total planned cuts at the group since Elop took over as chief executive in 2010 to more than 40,000 staff, or every third worker. 
 
 Of the latest job cuts, 3,700 will take place in Finland, where the firm will also close its plant in Salo - the last major cellphone manufacturing site in western Europe, the cradle of the global industry. 
 
 "This is a major blow. This is due to the operational mistakes made already during the previous CEOs. Maybe the signs of success are running low for Elop too," said Antti Rinne, chairman of labor union Pro. 
 
 Nokia said it expects its operating margin in the second quarter to be below the negative 3 percent level reported in the first quarter due to pressure on its smartphone business. It previously forecast it would be similar to or below that level. 
 
 On average analysts forecast the second-quarter phone unit margin to be at -4.6 percent, narrowing to -2.2 percent in the third quarter. 
 
 Nokia also said it would sell luxury phone business Vertu to venture firm EQT and revamp its management team. ($1 = 0.7953 euros) 
 
 (Additional reporting by Eero Vassinen and Terhi Kinnunen in Helsinki; Editing by Erica Billingham)
– Why did Microsoft buy Nokia's phone business? We now know Microsoft's answer: The computing giant released a 30-slide presentation today arguing that the move will improve Microsoft's margins on Windows phones, which will allow it to invest more in the platform, which will accelerate sales and market share growth, the Washington Post reports. But John Herrman at Buzzfeed has another explanation: "Fear of dying alone." Here's what he and other pundits are saying: The presentation "manages to sound both insane and uninspiring, outlining modest goals that still sound unrealistic," Herman argues—like capturing a whole 15% of the smartphone market. "It's a fitting end for the close of Microsoft's Ballmer era, during which the company … missed out on the most important change in consumer electronics in decades" while remaining profitable in unglamorous ways. Like everyone, Microsoft is trying to ape the Apple model, MobileOpportunity observes. But it's not so sure that's a good idea. "There already is an apple," the blog points out, and other software/hardware hybrid companies, like Palm and BlackBerry, have been crushed under its heel. Maybe Microsoft should have tried to patch up its tried-and-true strategy of licensing its OS. The move risks complicating Microsoft's crucial relationships with other PC and device manufacturers, one analyst tells ZDNet. But he adds that "Microsoft needed to make a bold move" or face "certain terminal decline," and that the price it paid for Nokia "seems extremely reasonable." Meanwhile, Matthew Yglesias at Slate digs up a fairly interesting memo from Nokia CEO (and, perhaps, Microsoft heir apparent) Stephen Elop, in which he uses the story of a Deepwater Horizon worker leaping from the burning oil platform—a seemingly desperate, yet necessary move—to explain the company's shift from its own failed OS to Windows Phone. Of course, Yglesias notes, that move "was basically a total failure." To read the full parable, click here.