Another Death in Smartphone Bloodbath - Windows Phone strategy so failed, now Nokia handset unit sold - to MIcrosoft

This is one of the saddest stories in the mobile industry. Today Nokia's handset unit is gone.

 

Microsoft has just bought Nokia's total handset unit - not just smartphones but also dumbphones - and the Nokia services business (of what is left of it) and gets it all for a paltry 5.3 Billion Euros. Truly catastrophic. Just before Elop announced his mad Microsoft strategy, in the last quarter of 2010, Nokia's handset unit - this which was now sold - produced revenues of .. 8.35 Billion Euros - and did this very profitably!  For the full year 2010, Nokia's handset unit generated 27 Billion Euros of revenues and 3.5 Billion Euros of profits!!! Elop wrecked all that in two and a half years and now the loss-making unit is sold for less than its scrap value.

What remains of Nokia, it is now back to its roots as a network equipment provider (NokiaSiemens Networks, that kind of business) competing with Ericsson and Alcatel-Lucent and the Chinese giants Huawei and ZTE. 

What becomes of Microsoft? It now is a handset maker. Its Windows Phone gets a new lease-of-life (certainly by now Nokia internally must have wanted to shift away from the dead platform). But the last remaining Windows Phone partners no doubt will further diminish their efforts so Windows Phone will become purely a Microsoft handset OS. I predict that Windows Phone under Microsoft ownership will sell less phones (by market share) than it managed when independent companies such as Nokia, HTC, Samsung and others made Windows Phone devices. There is a reason why it is failing, and the reason was not Nokia design devices, it was the dislike of Microsoft and its ways of doing business. 

Microsoft does gain the dumbphone unit of Nokia to plunder now, and attempt to convert into Windows Phone devices. Good luck with that, it goes totally against Windows history and competence, trying to create something very slim and streamlined and cheap to sell to Emerging World markets where free rivals are popular from Linux on PCs to Android obviously on handsets. Expect this share to continue to diminish over time, as the past Nokia-ness of the Microsoft handset unit becomes ever more 'Microsoftian'. With Elop in chrage of that unit at Microsoft, expect the damage to continue and this unit to be a failure at Microsoft in the long run.

The good news is that Elop is gone in that process, he shifts back to Microsoft. I will return with my epilogue or perhaps a few blogs about this a bit later, I am about to board a plane now. I'll digest the news and blog an update when I arrive at my hotel tonight. 

 

PS - I might have to write that book..

Comments

[Sander van der Wal]

Nokia has been in lots of businesses in the past. In the Now it also a Mapping solution provider, and not only selling network gear.

Feature phones are dead, and Nokia should be happy to be rid of them. Better, they even got somebody to pay for it.

If I was into tinfoil hat theories, I would formulate one in which the Nokia Board managed to fool Microsoft into paying for a dying business. The first step would be to hire a manager from the company with the biggest problem in Mobile, Microsoft.

Step 2 was to lure Microsoft into a business deal with Nokia becoming the preferred partner, driving everybody else away and making Microsoft completely dependent on you.

Step 3 is to drag execution a bit, as to make Microsoft even more willing to do a deal quickly.

We have seen step 4 being executed today.

And the best bit, everybody will happily believe that Ballmer all planned this because everybody knows Microsoft is completely Evil.

But I'm not into this kind of stuff.

[RobDK]

There are also questions about timing:

Last week Ballmer got pushed out.

This week Microsoft buys Nokia.

And all the bookmakers put Elop as favotite to take Ballmers CEO position. MS must be finished now, if Elop takes over!

[Mihai]

So Tomi,

Bases on your analysis it means that Bill Gates it's a moron now. You presumed MS will never buy Nokia by now.
I think you should tell us why your analyis was wrong and what you got wrong all this time, because it's clear that Nokia (especially Nokia Board) is the winner of this deal.

[crizh]

No, no, no, no, no!

Microsoft pays Nokia just enough to buy out Siemens and takes the Handset division they ruined with their Trojan Elop?

[I am beginning to have a bit more respect for the Nokia board but not much]

We need to act.

This deal isn't done until the shareholders say it is. I say it's time we gave them a better option.

I'm so far from ready.

I still don't have a proper business plan, financing or any useful contacts in the OHA or Nokia's shareholders but I just can't and won't wait any longer. If something is going to be done it needs to be done now.

I've been working on this for months and I was busy creating a blog ( http://thedarienproject.blogspot.com/ ) for the community at Groklaw the day Pamela folded up her tent and disappeared.

If anybody here, or even Tomi, can help I'd greatly appreciate it.

I'm happy, right now, to offer Nokia's board $7.5B for a controlling interest. I'm asking any long-term investors in Nokia to assign me their proxy for a vote to reject the Microsoft deal and to reorganize Nokia into something that can survive this storm and come out of it stronger than before.

All I need is $7.5B and a team of people that are passionate about making Nokia into the sort of dominant global force it ought to be.

Chris Hanlon
Founder
The Darien Project
http://thedarienproject.blogspot.com/

ps I think that patent deal is interesting. How much? For which patents? Why? Why won't Nokia sell them outright?

[Tommy]

The tumor (Elop) is now removed. Sadly the surgery also removed valuable parts of Nokia in the process, and Nokia will never be the same. But let´s also celebrate that Elop, the giant tumor, is finally gone.

The fact that the stock is up 40% pre-market reflects that the cancer patient will survive and may actually somehow do well in the future.

I would have wished Nokia acquired/merged with Blackberry. Nokia will now have $20B in cash (and Blackberry has another $3B in cash). HTC is another option.

[Death can be a relief to suffer ? No.]

Hello Tomi, I wrote on the 2011-02-17 all what you wrote since then. And this announcement, that I predicted too, ends a very sad BUILT "fate". You wanted to believe that the "failed" MS strategy at Nokia's would bring the "board" to change it, but no : the aim is achieved actually ! In the human history of dirty betrayals and organised scams, what happened gets on the top. All my respect to your clever analysis.

[willz]

Nokia as the producer of mobiles a lot of people loved is dead. The interesting thing is that Microsoft may use the brand for its S30 and S40 phones for another 10 years! This makes Nokia to a kind of "brand zombie". Nokia also must not release phones under own brand for 30 months. This could mean that they might release phones under own brand after that period. But right now I wonder if Nokia will ever sell phones again?

[Hansu]

I think Blackberry and HTC are Next to go conventional phone manufacturing is not profitable anymore. Samsung, LG, Apple and Sony who make any money on phones make other consumer electronic products that can cover the eventual losses. It's sad but on the bright side Nokia still keep the patents and the trademark name that they lease and Keep NSN that is profitable.

[Tomi T Ahonen]

Thank you everyone for the comments

I am at the Cathay Pacific first class lounge here at Hong Kong airport waiting to fly to New Delhi to deliver the opening address to the MMA Forum there but am sipping a double shot of Glenlivet 18yo Single Malt whisky and am having just melancholic thoughts about the once-world's-most-beloved phone brand. Nokia, my past employer, Nokia the most innovative phone company ever, now devoured by the Evil Empire the tech company I most despise. The Elop Effect, the cancer that killed my beloved Nokia. Well, the old networks division still remains to fight on, another day, and in two and a half years, no doubt we will see a new Nokia branded smarpthone emerge. What will become of that in 2016, who knows. But Elop killed Nokia as we knew it.

Its a very sad day in technology today

Tomi Ahonen

[jj]

In The Verge interview Ballmer is just hilarious: "Stephen Elop happens to be going from external to internal.."

"Our board is going through a process open to internal and external candidates. It's a process that they wanted well-known so they could consider everybody internal and external. Stephen Elop happens to be going from external to internal but our board will consider everybody."

[Mike]

RIP in Nokia - if i had known they were selling so cheap i would have looked under the couch for some extra cash.
Patents which apple paid billions the right to use after falsely sueing and now MS gets it for nothing, chicken feed.

I said i would buy a Nokia when Elop left - Now even that dream is dead.
Come on Firefox
Question
Is Sharp the next to get eaten up?

[AtTheBottomOfTheHilton]

Why aren't Finnish and EU authorities looking into this now. This was planned all along from the very beginning and Nokia was never allowed to make profit in order get a motive for selling it.

Smartphone Bloodbath? Now way, this is a planned murder and there is nothing natural or free market reason about it.

Unfortunately, Microsoft will get a patent injection making them a far more effective patent troll.

[Janne]

Microsoft presentation about the deal: https://www.microsoft.com/en-us/news/download/press/2013/StrategicRationale.pdf
Ballmer's email to staff: http://timesofindia.indiatimes.com/tech/tech-news/software-services/Microsoft-CEOs-email-to-staff-on-Nokia-acquisition/articleshow/22248063.cms

[Chetan Jain]

Tomi, I want to pre-order your book

[foo]

> PS - I might have to write that book..

Best news I have read in this blog so far!!!

I have read that, now that Nokia was assimilated by Microsoft, Elep becomes a stronger candidate to CEO.

I don't think this will happen. Elop was too incompetent, he destroyed Nokia. Sure, there are many clueless analysts out there; and Elop will lead the devices team at Microsoft, which will be an important part in Microsoft's "devices and services" strategy.

I think this is absolutely crazy, but... if this ever happens... your book will become an instant best-seller.

[NokiaLove]

But, Tomi, didn't you say this will NEVER EVER happen?

[foo]

@Mihai

> I think you should tell us why your analyis was wrong and what you got wrong all this time,
> because it's clear that Nokia (especially Nokia Board) is the winner of this deal.

I agree Tomi was wrong on this one -- in fact I explicitly told that, when he predicted Microsoft would leave the mobile business.

But making mistakes is part of the forecasting business, and I still think that Tomi makes great analysis and forecasts.

And I'm looking forward for that book. :)

[Tester]

>> Why aren't Finnish and EU authorities looking into this now.

Where's your proof? As far as it stands right now all this 'planned coup' stuff is nothing more than a conspiracy theory.

Give me one document or one taped discussion that confirms it. Before that, nobody will be able to do anything unless regulators think that this acquisition is bad for the market - and sorry, that's probably not the case.

As for Nokia making phones again - unlikely. They did sell off their ENTIRE phone making business after all, including all resources, all employees, all knowledge. They'd have to start at zero again.

I guess after the last 2.5 years many shareholders are just glad that this loss making business is finally gone for good.

[Hansu]

@atthebottom Microsoft doesn't own the patents Nokia owns them they are leased to Microsoft so the rights are still at Nokia

[foo]

@crizh

> This deal isn't done until the shareholders say it is. I say it's time we gave them a better option.

I don't think this is a bad decision at all.

Nokia was dying, and its shares jumped 40% after this news. Shareholders are happy.

The truth is that Microsoft also got an excellent deal, since Nokia's patents and assets were worth more than what they paid for.

Considering the terrible situation Nokia was, it was a win-win.