But fierce competition means it's a tough call for buyer Microsoft

Microsoft Corp's acquisition of Nokia Corp's mobile business is not likely to introduce a real comeback for the Finnish company in the world's smartphone industry, especially in the Chinese market, where competition is harsh.

On Tuesday, Microsoft said it would pay 5.44 billion euros ($7.18 billion) to buy Nokia's mobile phone business and related patents. As part of the deal, Microsoft will bring aboard 32,000 Nokia employees including the company's Chief Executive Officer Stephen Elop.

The joint announcement by Microsoft and Nokia has definitely aroused acute interest in China, where Nokia boasts having more than 250 million users. The nation is still Nokia's biggest market and is the world's biggest Windows Phone market.

Nokia had a more than 70 percent share in China's smartphone market in 2009. It now struggles maintaining a mere 1 percent share as of June, according to International Data Corp. The company was overtaken by Samsung Electronics Co Ltd, as well as by local players such as Huawei Technologies Co Ltd and Lenovo Group in recent years.

Flann Gao, head of communications for Nokia China, said on Tuesday there is no news about specific changes in Chinese management, staff and facilities.

"Microsoft's purchase of Nokia is not likely to change Nokia's worldwide performance in the short term because the mobile phone's overall strategy is not undergoing a big shift," said Sandy Shen, a telecom analyst with Gartner Inc.

"Whether Nokia will make a real comeback is dependent on stronger software support from Microsoft," Shen said. She added Microsoft's Windows Phone mobile platform failed to deliver a superior performance and needs to improve.

Two years after Nokia tied the knot with Microsoft in 2011 to produce smartphones based on the Windows Phone mobile operating system, analysts said the alliance has yet to bear much fruit. According to Canalys, the Windows Phone platform gained a 3 percent market share in the world's mobile operating system market, far behind Google Inc's Android system and Apple Inc's iOS platform.

In China, Nokia was the seventh-biggest mobile phone vendor in the second quarter, but the company was not even among the top 10 smartphone makers in the country during the period, according to a report released by Beijing-based research firm Analysys International.

Samsung, Lenovo and Shenzhen-based Yulong Computer Telecommunication Technology Co, which produces Coolpad handsets, were the top three smartphone vendors in the second quarter, with 18.6 percent, 12.4 percent and 11.2 percent shares, respectively, the report said. In the second quarter, more than 77 million smartphones were sold in China.

Some newcomers, such as Beijing-based smartphone company Xiaomi Corp, presented sparkling sales figures and are ambitious. Xiaomi sold 7.03 million mobile phones in the first half of this year, realizing a revenue of 13.3 billion yuan ($2.16 billion). The company has an estimated market value of $10 billion, even bigger than the purchase price of Nokia's mobile phone business.

"Nokia faces fierce competition in China. But I think the acquisition by Microsoft will help it to solidify its position as the world's No 1 brand in Windows Phone devices," Xiang Ligang, a telecom industry expert, said. He argued that Nokia might have reached the bottom and now it can start to recover.

However, the acquisition has brought in a hidden threat for many mobile phone companies.

"Microsoft's move will increase the worries of other mobile phone vendors, who also produce Windows Phone handsets," said James Yan, an analyst with International Data Corp China, hinting Microsoft may hand out more resources to Nokia, rather than other companies.

"That is likely to push some companies to look to self-developed mobile operating systems, or they may turn to other existing mobile platforms," Yan added.

Dai Shu, a spokesman for Shenzhen-based ZTE Corp, the world's fifth-biggest mobile phone vendor by shipments, said on Tuesday that ZTE will continue to develop more Windows Phones based on two key factors.

"First, we have to make sure that the Windows Phone is an open ecosystem; second, we will develop Windows Phone devices only as long as our consumers need them," Dai said.