Microsoft, Nokia and the Snowgun
The first Monday in September saw a whole lot of desperation: Microsoft announced plans to buy Nokia’s entire mobile business for $7 billion. Will this transform Microsoft into a mobile device powerhouse? Or is it more like trying to come from behind to win the Kentucky Derby on a horse with a broken leg by flogging the beast with money? Here's my analysis...
Microsoft + Nokia = ???
As a kid, my favorite line from the cartoons came from Simon Bar Sinister in the Underdog series. "With the formula for the Snow Gun, soon I will rule the world! Bwahahaha!!" It seems that Microsoft CEO Steve Ballmer comes from the same mold. But will this tech merger provide Microsoft with a fearful weapon capable of challenging Apple and Google for mobile device dominance?
Wall Street responded to the news by knocking five percent off the price of Microsoft stock the morning after the Nokia deal was announced. Coincidentally, that was about the same amount MSFT gained right after Steve Ballmer announced he is stepping down from the CEO position. The tech media is awkwardly trying to put lipstick on this pig.
Every tech news outlet is talking about the Nokia deal as Microsoft’s best chance to “pull out of the third place slot” in the mobile operating system market. The rah-rah articles politely ignore the fact that Microsoft is in a very distant third place, with just 3.7 percent of the market. Admittedly, that’s up from 1.5 percent when the Nokia Lumia launched, but it is rather disingenuous to trumpet the company’s “doubling” of its market share.
Windows Phone is simply not a serious contender in the mobile space. Microsoft’s partnership with Nokia only dragged Nokia down. Once the world’s leading handset manufacturer, Nokia’s sales have been plummeting even faster than its CEO, Stephen Elop, has been able to gut the company. He plans to finish what he started in 2010, chopping more than 50 percent off Nokia’s operating expenses before the merger with Microsoft, and that cannot be good for employee morale.
(Why yes, you do need enthusiastic, loyal, confident employees in order to compete in business.)
Is the World Ready for Mokia?
Ballmer has been aching to take control of Nokia for a long time. He feels that there’s too much wasted, duplicative marketing effort with separate companies. Other than that, there doesn’t seem to be any good reason for Microsoft to buy Nokia. The former already had the latter in a death grip.
Nokia, incredibly, agreed to make Windows Phone its exclusive mobile operating system. Samsung, HTC, and other device makers wisely hitched their wagons to the wildly popular Android and other OSes that people actually want to buy. Nokia accounts for more than 85 percent of Windows Phone sales… the embarrassingly tiny amount of Windows Phone sales.
Perhaps Microsoft has grand visions of becoming more like Apple, which is successful at both hardware and software. Or perhaps, in the wake of Google's acquisition of Motorola, they had a "me too" moment.
But when a software giant that cannot make a marketable mobile OS takes over a company that used to make marketable phones, nothing good will ensue. Microsoft's past forays into consumer electronics don't inspire me to believe that the Nokia partnership will bear fruit. Remember the Kin and the Zune? What about the Spot Watch? And how long will the Surface last, given that the company recently posted a $900 million quarterly loss on that product.
I'm not rooting for Mokia to fail. Competition in the marketplace generally leads to innovation, lower prices, and more choice for consumers. But my gut tells me that Nokia’s 32,000 employees will keep their jobs a little longer, and the new management will run the company into the ground shortly.
Your thoughts on this topic are welcome! Post your comment or question below...
This article was posted by Bob Rankin on 5 Sep 2013
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Article information: AskBobRankin -- Microsoft, Nokia and the Snowgun (Posted: 5 Sep 2013)
Copyright © 2005 - Bob Rankin - All Rights Reserved