Playing to their strengths
When big companies start to struggle, it's often because they've over-diversified. Why pay someone else to do this for us when we can do it cheaper and better ourselves, they seem to think, but when their core business starts to struggle those more peripheral interests start to look like a distraction, at the very least.
Finnish mobile giant Nokia has an extensive wireless modem operation, but its core focus is selling handsets, so it has decided to flog the modem business to a company that specialises in chips - Renesas Electronics - for $200 million.
Renesas is the product of the conglomeration of a bunch of Japanese technology companies. It was started as a joint venture between Hitachi and Mitsubishi Electric in 2003 and was merged with NEC Electronics in a deal that concluded in April of this year. Renesas Electronics is thought to be the world's third largest chip-maker, behind only Intel and Samsung, and it specialises in SoCs and microcontrollers.
The sale of Nokia's wireless modem business is being positioned as part of a new strategic alliance between the two companies to develop next-generation modem technologies for HSPA+ and LTE. The acquisition will allow Renesas to "deliver a complete mobile platform solution to the market." Approximately 1,100 Nokia R&D professionals, some UK-based, will also move over to Renesas.
"The agreement with Nokia demonstrates our long-standing commitment to shape the future of advanced mobile platforms and will serve as an important step for us to become a leading mobile platform vendor in the global market. Our collaboration with Nokia will enable consumers to enjoy true mobile cloud computing experiences through our advanced high-speed mobile devices," said Yasushi Akao, president of Renesas Electronics.
"Wireless modems are an integral part of today's chipset solutions, and we believe that Renesas Electronics, as one of the key chipset vendors in the market, is in an ideal position to further develop this offering. The alliance enables us to continue to focus on our own core businesses, connecting people to what matters to them with our mobile products and solutions," said Kai Oistamo, EVP at Nokia.
We can't help but think back to Nokia's long-running, but now legally resolved, dispute with mobile chip giant Qualcomm. This deal seems purpose-built to ensure Nokia never needs to do business with Qualcomm again.