Analyst: This Three-Way Partnership May Be Facebook’s Smart Answer to Apple
As Nokia (NYSE:NOK) struggles to find its lost footing in the global phone market, several options have been suggested for the once-leader to make a new mark in today’s smartphone-focused world. While many think Microsoft (NASDAQ:MSFT) would be the obvious pick for a takeover bid for Nokia, with which it entered into a partnership to launch the Lumia line, technology analyst Jeff Kagan has a suggestion for a variation on that arrangement.
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“Mark Zuckerberg knows Facebook has to move into — and be successful in — the wireless space,” Kagan writes. “He knows advertising on the smartphone is more difficult than on the computer. He also knows earnings are key. So why wouldn’t he be interested in acquiring Nokia? Another option is that these three companies can agree on some kind of three-way deal. Imagine a combination of Facebook, Microsoft and Nokia.”
Both Microsoft and Nokia have been struggling to counter the almost overgrown clout of Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) in the highly profitable smartphone market, and joined forces to contribute their software and hardware expertise, respectively, for the launch of the Lumia model. However, while there have been sporadic cases of the Windows Phone-powered doing well in certain markets, overall response has been lukewarm.
“Microsoft has been trying to succeed in the wireless space for a decade but has not really broken through,” Kagan writes. “Its new partnership with Nokia on the Lumia looks like it has the best chance yet, but it still isn’t shaking up the industry.”
While carriers such as Verizon Wireless (NYSE:VZ) and AT&T (NYSE:T) — which became part of the Lumia alliance in the U.S. — have been hoping for an alternative in the market to break the domination of Apple and Google, it hasn’t quite happened yet.
To add to the mix, Facebook has been rumored to be entering the wireless market in search of a new and more reliable revenue stream as it deals with a post-IPO earnings scrutiny. Kagan thinks the social network would need an established partner to succeed in a business it has no experience in.
“Can Facebook operate a wireless handset business? No. It would have to keep Nokia management and people, but this could be a solution for both Facebook (NASDAQ:FB) and Nokia (NYSE:NOK). Imagine a Facebook smartphone. Just think about the possibilities. Of course, there are other companies Facebook could consider, including BlackBerry maker Research In Motion (NASDAQ:RIMM). We’ll just have to wait and see what happens next,” he writes.
With the current reinvention, led by Apple, taking place only over the last five years, quick turnarounds are not impossible in the industry. And Kagan thinks the time is right for a new wave.
Shares of Nokia finished Friday above $3 for the first time in 13 trading days on a 6.71% surge upward. Meanwhile, Facebook closed Friday up 3% at $27.10 per share.