Ok. Now its pretty well established in several news sources, that Nokia tried to get Microsoft to buy the company last year, but Microsoft decided against it. That gives fresh insights and 'clues' to what might have been driving Elop to such unprecedented madness from this infamous Burning Platforms memo - the costliet management memo of all time - to the ludicrious decisions about announcing the end of Symbian with no Windows Phone smartphones even to show, far less to sell; to the infuriating decisions to not support Nokia's own-developed and truly excellent products from the N9 on MeeGo to 808 Pureview on Symbian, to not even releasing the N950 on MeeGo to the baffling decision on suddeinly terminating Meltemi mere weeks before phones were ready to be shown.
Elop is the worst CEO of all time, he has personally caused the biggest corporate downfall in the Global Fortune 500 history, after we eliminate management fraud and crimes. For management incompetence Elop is the benchmark. The worst CEO ever. We need not review all his damage, growing smartphone sales turned into history's fastest collapse. Growing profitable handset business turned into fastest losses ever in this industry. Market share collapse - Nokia was twice as large in market share as the iPhone, four times as big as Samsung's smartphones when Elop started - and grew more in 2010 than either rival - but now Nokia smartphones (on all of its platforms, combined) is one sixth the size of the iPhone and one tenth the size of Samsung's smartphones. Nokia share price, Nokia brand value, Nokia loyalty, all destroyed in the past 2 years and four months.
I don't mean that Nokia was 'in great shape' before Elop - I never said that, I was warning that Nokia had problems at the time - but Nokia was growing strongly, making strong - growing - profits, and towered over its rivals before the Elop Effect in February 2011. After Elop started to massacre the businesses of Nokia, its been sheer carnage.
Now. Could there be a reason to the madness? What if we don't examine this from the prism - what is best for Nokia and its shareholders. If we examine it from this angle 'Elop promised to sell Nokia to Microsoft'. We know for a fact, that those discussions were going on during 2012. Very seriously.
A MICROSOFTIAN ANGLE
So first, lets be clear. What was it that Ballmer was expecting of Nokia. Ballmer sent Elop to go prepare Nokia for a purchase. So much is clear. Elop met with Ballmer regularly when Elop 'went home' to his family living in Seattle, right next to Microsoft's HQ. Yes, Elop 'commuted' to Espoo Finland on long-haul flights and kept a second apartment in the Helsinki area.
But yeah. What did Ballmer expect. Nokia had 34% market share in smartphones in 2010 when Elop was made CEO. It was to be expected that some of that market share would be lost, due to the natural long-term market erosion that Nokia had seen very steadily, losing about 5 market share points per year (Nokia invented smarpthones, started with 100%, and especially after the iPhone in 2007, the number of competitors in smartphones had mushroomed massively, of course Nokia was losing some market share in any case).
Furthermore, a shift away from Nokia's home-grown Symbian and its new MeeGo platforms to the modest-sized Windows platform would result in some further loss in market share, almost every analyst conceded that back in Spring of 2011. Surely Ballmer knew that he could not expect Nokia to hold 25% or something like that when Microsoft might want to buy it. How much were they expecting? We can see that from Nokia's strategy projections and the various analysts. They expected something in the order of 15% to 20%, a strong 'third ecosystem' behind Android and iOS, but ahead of Blackberry in a 2011 time-scale. This will be what Ballmer would have had in his mind as a nice acquisition in Nokia, to be his handset factory for the Windows 8 future of converged products.
Elop made a total pig's breakfast out of that plan. Nokia had lost half of its customers in less than 8 months after the Elop Effect - a world-record collapse in market share, not just in mobile phones or smarpthones, but in any industry. Toyota's problems with brakes, Coca Cola's problems with New Coke and BP's problems with its oil spill didn't cause this bad damage this fast. So Ballmer would have seen a potential disaster by Q3 of 2011 with Elop in charge, when Nokia's smarpthone market share had hit 14%.
Then came Windows Phone launch, and we know, it was the costliest new phone launch ever, by Nokia, by a wide margin. Supported by many carriers giving it the biggest carrier push ever, and that supported by the biggest push Microsoft had given any phone - to the degree some buyers received free Xbox gaming consoles if they bought an early Nokia Lumia. We know what happened, the Nokia market share collapse continued. Six months after Lumia launch, Nokia's market share was under 10% at 8% and by year-end when Windows Phone 8 was launching, Nokia's global smartphone market share was literally one tenth it was two years before, at 3%. Why on earth would Ballmer want this disaster of a badly-managed company.
THE MOTIVATIONS TO ELOP'S MADNESS
So with that perspective, that this ship was sinking so badly, no way would any sane Microsoft CEO want to buy it. Not from what it had been to what had been done to it. But now, lets turn to Elop. Elop clearly had pitched the idea to the Nokia Board, that Microsoft would like to buy Nokia. Elop knew Microsoft, Elop knew Ballmer, and Elop could privately talk with Ballmer back home in Seattle, where nobody would even know. As we have since heard, for example, in the summer of 2011, Ballmer and Elop conspired to consider buying RIM ie Blackberry, but decided against it. So they've been cooking up these plans for a while.
We do not know exactly when it is that the idea was first brought to the Nokia Board (or it might be out there, if someone has seen news reporting on it, please share in the comments and I'll update the story). We do know that Elop made a long series of decisions and announcements that were seen as 'stupid' and often caused severe drops to Nokia share prices (or stopped the growth of Nokia share price, like with the unveiling of the N9 running MeeGo). Why would an idiot CEO want to stop growth of the share price and actually wish for a decline in the share price? If he had some personal play in the share - illegal obviously, insider trading and manipulating the stock price. Or if he wanted to make Nokia more appealing to a buyer - to Microsoft.
So. Lets examine some of Elop's decisions now with the prism of 'would this be in the interests of making Nokia more appealing to Microsoft in an acquisition'.
And the picture becomes very clear. Why call Nokia's own products bad, when in fact they were not. When in fact they were award-winning, market-dominating and where even Apple would only weeks later agree to pay Nokia in royalties for Nokia patents, not the other way around. Why the Burning Platforms memo? To cause a severe drop in Nokia sales, retail sales support, carrier support, Nokia brand and - Nokia share price? That cannot be in the best interests of Nokia owners (shareholders) or Nokia employees or Nokia partners or suppliers, or Nokia retail channel and carriers, and end-users. Any CEO to release that memo would be a madman - but what if its his intention to make Nokia more appealing to be bought by Microsoft? It did help cause a severe drop in Nokia share price. Together with the stupid announcement of the Windows shift and end of Symbian with no phones to sell - helped push Nokia share price to under half what it had been in less than half a year. A big achievement, if the objective is to get Nokia ready to be sold to Microsoft?
The non-support of the N9? What the f*ck. The only smarpthone ever to be regularly considered better than the iPhone - no Nokia phone before or since achieved that - and the one running MeeGo the only smartphone OS rated in any side-by-side user reviews on par with - or even better than - the iPhone's iOS. Any sane CEO would have taken the N9 and been seen on every single magazine and website and television tech show with that phone, celebrating its excellence. Not Elop. One day after it was unveiled, Elop said, no matter how well it will sell, he will not release other MeeGo devices.
Yes, What the Fuck is the right response. That is a madman speaking. This is the device that beat the iPad for the 'Oscars' in industrial design (the D&AD Awards) - who wins against Apple in design, ever? This is the smartphone so highly praised, German newsmagazine Der Stern - newsmagazine not tech magazine - reviewed it and recommended Germans to fly to Austria or Switzerland - another country - to buy it, as Nokia refused to sell the N9 in Germany. What CEO refuses to sell such a hot product in its biggest markets?
Yes, utter sheer madness. But would it make sense if you're selling Nokia to Microsoft? MeeGo was a far better OS than Windows Phone, and MeeGo was ready for Tablets and netbooks, something Windows Phone would not be for at least another year (Windows 8/Windows Phone 8). MeeGo had dozens of partners and the first non-Nokia devices were already out, such as Fujitsu's first netbook running MeeGo. MeeGo was pure gold for Nokia - China Mobile, the world's largest mobile operator/carrier had already selected MeeGo as their default smartphone OS - China Mobile is as big as AT&T plus Verizon plus Sprint plus T-Mobile in the USA, all added together - and that number doubled. That is how enormous is China Mobile. And they were Nokia's partner with MeeGo. Any sane Nokia CEO would launch MeeGo and all MeeGo devices as soon as possible and as broadly as possible. Not just the N9, but its sister phone the N950, and the others in the pipeline - as the phone that became the first Lumia, the Lumia 800, etc.
Elop effectively killed MeeGo one day after it was revealed to the press by promising there will be no more. Is that in Nokia's best interest. Hell no. But would that be appealing to Microsoft, afraid of MeeGo as a strong laptop, netbook, tablet and smartphone platform with Intel as co-developer and dozens of equipment makers lined up, and several carriers committed to it, including China Mobile? You betcha! Microsoft was afraid of MeeGo. Ballmer wanted MeeGo dead.
So Elop's decision to kill MeeGo makes some sense if we examine it as Nokia 'appeasing' Microsoft and trying to keep it happy in the merger talks. I would argue its very cunning power-play by Ballmer and Elop and the Nokia Board were utterly defeated in this ploy, because obviously Nokia ended up not being sold, but had to destroy its future platform anyway. This is like Chamberlain and Hitler in Wordl War 2, British Prime Minister thought he had gotten a solid promise from Hitler not to grab anything more in Europe, but like Hitler in world history, Ballmer in tech history just took what he wanted, gave promises to Nokia and conveniently ignored those. Ballmer wanted Symbian dead and MeeGo dead. He got both.
Same with Meltemi, Nokia's low-cost smartphone operating system running Linux. It was only weeks from the launch of the first low-cost smartphones. Elop killed the unit, fired the people in charge and why? The future of smartphones is not the high end where Lumia fits and Windows Phone can be sustainable, maybe, price-wise. But everyone from Nokia to Microsoft has said that Windows Phone does not suit low-end smartphones under 100 dollars. Meltemi would have fit smartphones costing under 50 dollars, where lowest-end bada and Android smartphones are priced. Elop killing it with phones ready to launch is total lunacy by the CEO if we think of Nokia's best interests (and those of Nokia shareholders). But what about selling Nokia to Microsoft. Yes, Microsoft wanted Meltemi to be dead. Dead explicitly BEFORE any phones are shown to the world. Right then, in 2012, the discussions were the strongest about the acquisition by Microsoft.
We saw the time-line. Soon after Meltemi was killed, suddenly Ballmer and Elop had a falling-out. We saw Ballmer talking of launching Microsoft's own products - and the Surface tablet emerged. We saw Elop talking about Windows not being the only way forward. We can pretty well pintpoint when the love ended, and Microsoft started to feature other makers with Windows Phone handsets etc. And the stories came out that Nokia actually has to pay more lifetime to Microsoft in royalties, than the marketing support Microsoft paid Nokia to help launch Lumia etc.
So we can see, the marriage dance ended somewhere in the summer of 2012. I'll go back and dig through the exact comments and actions, but yeah. The Microsoft decision was clearly made then. Ballmer was no longer at all happy with Windows Phone. Soon we'd even hear Bill Gates saying that while many things are going well for Microsoft, Windows Phone is a total fiasco (i forget his exact words right now).
So then what happened? Elop hoped for a miracle with Windows Phone 8. He didn't get that. He promised the Nokia shareholders' meeting miraculous levels of growth in Lumia sales. He slashed and killed any remaining Symbian sales (why? the 808 Pureview was for example sustaining high sales and Symbian - higher average sales prices than the Lumia series) And he's now playing accounting tricks to try to convince everyone that Nokia is 'profitable' such as selling the Nokia HQ building for the Q4 2012 quarter, and assigning all its income to the handsets unit, to create the thinnest sliver of 'profit' for the handsets unit - a profit so slim if the Headquarters building revenue had been assigned by more conventional accounting principles such as by headcount or business unit revenues, the handset unit would not have been profitable.
Yes, Elop is now just doing stupid things because he's an incompetent manager, and pushing Nokia ever deeper into the ditch. Any sane CEO would look at the disasterous Windows Phone failure in the market - come on, before this alliance, Windows has 5% market share in smartphones, now 'with Nokia' it has 3%. This after Nokia has sacrificed 31% of its smartphone market share on Symbian and Maemo/MeeGo.
There is much more, I'll return to this theme shortly. But I wanted to post this to begin with.
And Nokia Board - please, now its time to dispose of the useless and self-destructive Elop and his Microsoft-Mafia. He had one card to play. He played it very poorly. Nokia is far worse today than it was in September 2010 when that smooth-talker con-artist Elop took control of Nokia. If you fire Elop now, and announce not that Nokia will end Windows, only that you will explore other platform options including Android - that news - Elop gone and Windows no longer the only path - will bring Nokia's share price to a strong growth path. You know, Board Members, that the carriers/operators and retailers are punishing Nokia - not because Nokia is evil, not because Nokia phones are bad, but because of Elop and Microsoft and Skype. Elop has said so many times, that carriers and retail do not support Nokia sales, and he admitted clearly in the 2011 Shareholders' Meeting that the reason behind carrier hostility to Windows Phone smartphones is Skype. So too have said essentially all Windows Phone partners and so have said Nokia and Microsoft sales staff either current or past. This is a dead-end product that cannot ever help Nokia back.
Whatever else you decide over the meetings you have, please make the first decision to fire Elop and the second to announce that Nokia will introduce Android (or MeeGo or Sailfish) based smartphones to be produced alongside Windows, soon. That is the best way forward to Nokia. Then please hire some CEO from a carrier/operator to help Nokia regain its trust in its most important customers - the carriers/operators.
Nokia shareholders - do you feel you've been treated fairly in this. Elop has been manipulating the Nokia share price against your best interests, in his futile attempt to sell your company to Microsoft, at a fraction of what it should have been worth. HIs actions cannot have been motivated by anything else except to create a fire-sale of Nokia at below-market value. And we now hear from Huawei for example, that while they are interested in Nokia, Elop has never even entertained bids from others than Microsoft. Is that in your best intereest? When we heard in the past year or so, that Samsung, Sony, Lenovo and Huawei have all been interested in acquiring Nokia but Elop refuses to talk to them? Is that really the best for you, as Nokia shareholders. And why are you allowing Elop to remain in charge after this 'treason'. And why are you allowing the Board to remain in power too? Just asking...
PS to my regular readers - please post comments on the various instances that you can recall, about what all Elop has done which would make sense in the light if he was trying to sell Nokia to Microsoft. I'm not going to remember all, but I'll write a longer blog examinging the major issues, and greatly appreciate your comments and reminders. Thanks!