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

[Earendil Star]

Usual misleading info: put things into perspective and you discover that in big markets (China) android is dominating and growing the most...
Plus, what conspiring? In fact, It's a matter of denying evidence, rather. Nokia's dwindling cash was largely due to the NSN acquisition, which in turn was made to pave the way to MS' takeover of Nokia. No conspiracy, simple facts. Boring if you don't care, but nothing to do with the market normal functioning.
Remember: if business decisions defy common sense, things stink. This MS Nokia saga is no exception.

[logic001]

'' 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 ''' Tomi I am a little bit disappointed. You could at least drink Irish Whiskey. We all know its by far the best !! :)

Guys don't forget this is subject to shareholder approval. Investors that are here. Im sure we all know how to vote. We might not be able to prevent MS getting their dirty hands on Nokia but Im going to do my best to make sure they pay fair.

[Tester]

@Earendil Star:

You know, if you want to see a conspiracy you can always twist the facts to fit your view of things. Without any conclusive proof that doesn't mean anything, though. And that you don't have. In fact there is no proof whatsoever and I don't happen to believe in conspiracy theories that are based 100% on make-believe without any hard facts confirming them. I just see some badly done business.

Case in point: The NSN takeover. Please tell me, what should Nokia have done? Their hand was forced or they would have lost a lot more if someone else had gotten it. And I do not see any correlation to the sale of the devices unit. That had been in the making for several months before NSN even became an issue.

The conspiracy doesn't even make sense because now Microsoft is the proud owner of a weak loss-making handset unit that will require quire a bit of cash infusion to get working again - if at all. In fact the final outcome of this mess is the worst case scenario that could have possibly happened to Microsoft. Instead of shifting the business risk to their partners they now have to shoulder it alone. Instead of a healthy, thriving ecosystem they got a comatose patient on life support. Instead of getting a significant share in the desirable high end phone business the majority of WP sales is at the opposite end of the spectrum.

So please tell me, what did they gain? Microsoft needed a healthy partner to get their system into the market. They had no use for a rotting corpse. But now they are forced to buy it anyway because if they don't, WP would die a very sudden death in the near future.

[Tester]

@logic001:

Try as you want, but as I see it, most shareholders will be glad that this dead meat has finally been excised.

Why keep a loss making business unit and another barely profitable unit that's already scheduled to be wound down in the upcoming years? (Feature phones are a dying business and everybody knows that.)
The Nokia management put it quite fittingly when they said this was about 'maximizing shareholder value'. In plain English that phrase means that they are glad to be rid of that business which would have dragged them down into the abyss.

[Jac]

@Tester

'Prove it! That's what it'd come down to. You got to prove that Elop deliberately acted against Nokia's best interest to make a formal accusation.'

No. This is not a court, there is no need for 'formal accusations'. Conspiracies by its very nature are secretive. The facts are often hidden and do not come to light until years after. That does not mean that the conspiracy does not exist, however. If it looks like a dog, barks like a dog, acts like a dog, chances are it is a dog. No need to scrutinise pedigrees.

[Sander van der Wal]

@Earendil Star

Not everybody is buying Tomi's Evil Elop theory. I think it is rubbish, based on the public evidence. And I had no opinion on the probability of succes in the move to WP. I wasn't interested in computing the odds, because as far as I am concerned, there will always be a number 1 and a number 2 ecosystem to program for. That doesn't mean that i cannot understand the reasoning, it means that I do not have to care. Wait and see.

@ Jac

There is more than one conspiracy theory possible. What about the one I made up: The Nokia Board conned Microsoft into buying its failing phone business by hiring one of their managers as CEO, getting preferred licensee status, makimg MS completely dependent on Nokia for WP, and creating a "crisis" forcing MS to buy the dying phone business?

It explains all the facts as well as the Evil Elop theory, is much more lattering for the Finns. Unless of course you like being the underdog getting s*****d by the Evil Microsoft empire.

[crizh]

@Sander van der Wal

What evidence do you have to characterise Nokia's phone business as 'failing'?

Seems to me that Nokia's phone business was the strongest and most profitable in the world at the the time of this proposed scheme to dump it on an unsuspecting Microsoft.

It does seem like the board has made the most of the lemons that they found themselves with. They keep the brand, all the patents, the maps and NSN for almost enough cash to buy a controlling interest outright.

It seems very much like they decided not to sell out to Microsoft but didn't have any other good offers. When their backs were against the wall they sold the worthless phone division to Microsoft for enough to absorb all of NSN and still have a viable business.

If only they had a better offer.

Maybe they will get another one before November 19th.

Chris Hanlon
thedarienproject.blogspot.com/

[Finnish are "too" honest]

It is as if Finnish people PAID the most ugly crooks to rape and kidnap their most beautiful daughters.
Elop sold most of the ASSETS of Nokia in 18 months : patents, plants, buildings etc. Nokia is much POORER today and sold at a tiny value.
It WAS not a dying business. Nokia = FAR the best devices, an enormous stock of patents, the best engineers and innovations etc. Nokia showed a flexible watch-phone some years ago.
The networks devices business is a very difficult activity against the chinese companies that respect no rule of concurrence and with the B2B market only (products to consumers should be developed), so it is even worse than mobiles sold to anybody.
Services ? MS will take everything by redirecting FROM the "MS" phones : mobile payments, location, music sales, etc. MS can develop its own services, buy some other companies etc.
Elop was paid more than dozen of millions $ + stock options by Nokia... to vanish Nokia's value.
It is not about thinking that MS is evil, but just assessing the facts.

[Vesku]

I think Tomi will erase this, but isn't it time to re-evaluate Elop as a CEO? Microsoft's CEO? For me this is a Macchiavellian, Sun Tzu manouver of all time to get the most successful mobile phone maker, already designing devices for your platform, for an pittance of what is used to be worth, but with kinks ironed out of the process, and some Lumia sales success already on the horizon?

I don't know if we'll ever find out, but if Ballmer and Elop had what happened even as one potential scenario in their heads in 2010, my hat is off. Well played!

[eric]

Well, as it turns out, Mr. Elop actually got mixed two OS in his burning platform memo. The correct wording would have been: " Hey you Symbians, let's jump on this burning platform that I have here and leave the rich one behind. " Unfortunately, Mr. Siilasmaa was dumb enough to make the leap.

[frans.eriksen]

You should write a book, but it will also be interesting to know what happened inside Nokia, mainly at the board level. What where they thinking. "The rise and fall of Nokia - as seen from the board level".

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