Microsoft Corporation (MSFT) — Nokia Corporation (ADR) (NOK): Making The Grade

But as tough as it may be to swallow for die-hard fans, the deal strengthens Nokia’s balance sheet considerably and allows it to concentrate on NSN, mapping, and developing new technologies  — historically, areas of strength for Nokia. Sure, Nokia stands to lose about $3.6 billion in quarterly revenues by selling its devices and services unit, but it won’t miss the ongoing losses.

As with any deal of this magnitude, some analysts and pundits are saying Nokia sold its devices and services unit too cheaply. But adding $2 billion in value to its patent portfolio over the next 10 years is great for Nokia, as is ridding itself of an underperforming unit in a hypercompetitive market led by Apple‘s iPhone and Google‘s Android OS. That’s a fight best left to others, like Microsoft.

As for Microsoft, $7.2 billion is hardly chicken feed, but it doesn’t put a dent in its strong balance sheet. More importantly, the acquisition of Nokia’s devices and services unit brings control of Microsoft’s mobile expansion efforts in-house, making it easier to fully integrate its Windows Phone OS into mobile devices. That’s right in line with Microsoft Corporation (NASDAQ:MSFT)’s objective to drive future growth by relying less on the declining PC market and more on expanding its mobile offerings.

Final thoughts
Deals of this magnitude, in which both parties fundamentally change the focus of their respective businesses, can be a bit scary for investors. There are a lot of “ifs” to consider.

But given Nokia Corporation (ADR) (NYSE:NOK)’s acquisition of the remaining 50% of NSN and its focus on its other products and services going forward, along with Microsoft’s objective of growing its mobile footprint in part by better integrating Windows Phone, this deal accomplishes exactly what both companies needed, in one fell swoop.

The article Microsoft’s Acquisition of Nokia’s Smartphone Business a Win-Win originally appeared on Fool.com and is written by Tim Brugger.

Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google. It owns shares of Microsoft.

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