Microsoft’s takeover of Nokia’s mobile phone operation is bound to end up as a business school case study. The deal now looks like a disaster for all concerned – many of the 25,000 Nokia employees have seen their jobs disappear and Microsoft has written off just about all the money it spent.
It looks as though the new chief executive Satya Nadella has looked at the strategy of his predecessor Steve Ballmer and decided it was a disaster. It was Ballmer who decided to buy Nokia, and when the deal was announced he told me “together as one company with the devices folks at Nokia, we’ll do a phenomenal job”.
With hindsight, it looks like a phenomenal error – but was it obvious at the time? Investors were certainly dubious, but even today Microsoft isn’t prepared to accept that it was a bad idea. The line from the company is that it was the right decision at the time but that the mobile phone market changes at an incredible pace.
A blogger who writes about Windows argues passionately in support of that view. He argues that having formed the initial partnership with Nokia, making it the flagship Windows Phone builder, Microsoft had little alternative but to go ahead with a full takeover.
“Nokia was already in dire straits, and their board was getting itchy for alternatives,” writes Daniel Rubino.”Had Nokia decided to jump all-in on Android devices – or worse – sold to a competitor, neither would have been good for Microsoft and their Windows Phone story.”That may be true, but it begs the question of whether Nokia was ever the right partner. For a company that is now going to focus on business customers – always its core strength – it might have been more sensible to tie up with Blackberry. The ailing Canadian firm still has a strong reputation for security, and many professional and enterprise customers remain wistfully nostalgic about its devices. Windows Blackberry could have been a very lucrative niche.
What next then? Microsoft insists that it will still make smartphones, but will focus on its wider “ecosystem”. There will be fewer in-house phones, and the aim will be for them to showcase Windows Phone’s capabilities for other manufacturers, much as the Surface does for tablets.
But it is hard to see the likes of Samsung and HTC rushing to make Windows Phone handsets, however great their concerns about their reliance on Android. And whatever Microsoft says about developing its own mobile ecosystem, it looks as though selling access to its software on other mobile platforms may prove more lucrative.
The real tragedy here is for Nokia, Finland and Europe. In 2013, Steve Ballmer promised that Finland would become the “hub and the centre for our phone R&D”. That at least seemed to promise that the team at what was – only a few years previously – Europe’s technology superpower would stay intact, albeit under US ownership. Who knows what would have happened if Nokia had tried to carry on as an independent business – but it could hardly have turned out worse.