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With Nokia deal, BlackBerry fades from Microsoft’s sights

Microsoft Corp. retail store employees and guests mingle at a pop-up Microsoft Store in Bellevue, Wash.


Microsoft Corp.'s purchase of Nokia Corp.'s mobile handset business finally puts to rest one of the most persistent rumours in the technology industry over the past couple of years. Microsoft is extremely unlikely to have much interest in buying BlackBerry Ltd., Canada's struggling mobile device maker, now that the software company is taking almost total control of the Windows Phone ecosystem with its $7.2-billion (U.S.) purchase of Nokia's smartphone operations.

BlackBerry has essentially been looking for a buyer since the summer, when it announced it had formed a committee to explore all options to revive its business – including an outright sale. For years, Microsoft has surfaced as a potential buyer, in large part because the company has a mobile operating system that received critical praise (if not much consumer adoption) but has never built a commercially successful smartphone. With BlackBerry's technology, Microsoft would gain reliable hardware and a foothold in the enterprise sector, where most businesses still use Windows-based computers.

But engineers who worked at both companies have long cautioned that a Microsoft-BlackBerry alliance would be technically challenging. BlackBerry's hardware and software products – built at a time when there were essentially no other players in the smartphone industry – were never designed to play well with outside systems. This is partly why the company had such a hard time integrating technology from its subsidiary QNX into the core BlackBerry operating system, leading to multiple delays in the launch of the BlackBerry 10 devices. To integrate BlackBerry into the Windows ecosystem, Microsoft would have likely faced similar technical hurdles.

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With Finland-based Nokia, few such hurdles exist. For years, Nokia has essentially worked in lockstep with Microsoft. The Nokia-built Lumia phone line is by far the best-selling Windows-based device in the world (although that's partly due to the very limited success of all other Windows-based phones).

For BlackBerry, the deal means the race for third place in the smartphone industry just got tougher.

Microsoft's purchase of Nokia's phone business gives the Canadian company yet another multifaceted tech giant to compete against. Many of the BlackBerry customers who have left for Apple and Google products in the past few years have done so because those companies already provide them with everything from laptops to online media stores to e-mail services. Now, Microsoft joins the ranks of those companies from which consumers can purchase almost all their communication and entertainment products.

By taking control of the phone-building business, Microsoft is now able to offer a complete ecosystem, similar to those offered by Apple and Google. Like those companies, Microsoft can leverage a variety of hardware and software offerings that work well together, such as Windows PCs, Lumia smartphones, the Xbox gaming system and myriad programs, such as Office and Outlook.

"The sale of Nokia's mobile phone business demonstrates conclusively the need for major consumer technology vendors to create ever deeper and wider offerings to consumers and ecosystem participants in terms of their device, platform and service offerings," said Tony Cripps, principal device analyst at London-based research firm Ovum. "This approach is no longer simply an option but a prerequisite to competing successfully in this highly converged market."

Even though BlackBerry's current user base remains very large, Windows-based devices recently took over third place in U.S. consumer smartphone market share, far behind Apple and Samsung.

However, Microsoft has shown a tolerance for short-term pain in pursuit of wider market share gains. For years, the company reportedly lost money every time it sold an Xbox. Over time, the gaming system became a living room staple for millions of consumers, and eventually served as a hub from which Microsoft launched a massive digital storefront.

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BlackBerry shares inched upward on Tuesday to $10.75. The company's share price jumped to almost $12 in mid-August, after it announced a committee to explore all possible options, including going private or putting itself up for sale, but has given up almost all those gains in the three weeks since.

Although it appears less likely than ever that Microsoft would have any interest in buying BlackBerry after the Nokia purchase, there is still a chance it could be interested in part of the Canadian company. Should rumours that BlackBerry is thinking of spinning off one or more of its divisions prove true, Microsoft may still be interested in making a bid for BlackBerry's patents, or its popular BlackBerry Messenger software.

Still, as it stands, almost all signs indicate that, if Microsoft was ever interested in buying BlackBerry, it isn't any more.

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