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

[foo]

@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.

I don't think so, and I explained why in previous comments.

Microsoft "bought" Nokia in 2011, when Elop announced the partnership.

From that moment on, Nokia was no longer an independent company.

The goal was to make the partnership succeed -- and Microsoft offered a bribe of $1B / year which would last 4 or 5 years.

Of course, Nokia was expected to pay software licenses after a couple of years.

If everything went as expected, and Windows Phone reached 20% of market share, that would mean 400 million units per year. Supposing that Nokia paid $10 per unit, Microsoft would be earning 4B/year.

Great business for Microsoft, not so good for Nokia.

So, I don't buy the idea that Microsoft wanted to ruin Nokia. Microsoft wanted the partnership to succeed, so they would have bought a multibillion business for peanuts.

Things went terribly wrong, though. Buying Nokia was the only way to keep Windows Phone alive.

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

This also worries me.

[Marat]

King is dead. Long live the King! Finally we can now see Nokia really innovating. Actually Nokia is a start-up again. Agile and flexible. Many options. Fold in Jolla. Make a Nokia OS. Bring in a Chinese manufacturer. Design hardware, outsource production. Just as Apple.

[V900]

So Tomi...

A week ago you were telling us what an awful CEO Ballmer had been, how Microsoft would dump Windows Phone and Nokia would find another OS for their phones.

Clearly you couldn't have been more wrong, and maybe your next post should be on why this happened, why you posted what you did, and why you were so badly mistaken?

[Nerea]

According to Nokia PR they could start selling Nokia branded smartphones since 2016 or license the brand to other company to sell smartphones in 30 months after the sale. Do you think by that time Nokia will start selling their own phones again or they will be too lazy to start all over again? They would need to rebuild the entire Devices and Services division from the ground up or acquire a company and start building from there (Jolla would be the sentimental choice, but too small perhaps).

Also, what are the thoughts of people in Finland about this? Because as an european person I have sad feelings for this as Nokia was the last giant in Europe in mobile tech industry.

[Ding]

RIP Nokia. Maybe I'll get a Nokia 515 feature phone as a memento.

Mission accomplished, Elop you Microsoft stooge. You must be happy now. Now piss off to Microsoft and take over Ballmer's job.

[Antti K]

Tomi was wrong on the buy-out thing, yes.

However, it also is starting to appear that MS was getting desperate and had no other choice.

Acer exited. Asus exited. Samsung was about to exit. LG did too.

Not just WP, but also WinRT.

Had Nokia exited....

The only thing to settle was the price for both, so that both could save some face and lie with their PR units, that this was the best deal, win-win, so to speak :)

MS has a long term unified OS strategy, and it was failing already in step 2.

It was make it or break it decision for them.

Had Nokia just stopped manufacturing WP phones, WP would have been totally gone. Dead. Kaput.

And that would have taken out an important leg out of the MS unified OS strategy that was already limping to begin with.

Plus killed Windows in mobile space, which they are hoping still to cash in on.

NO, MS had no choice, but to buy.

That's the current favourite hindsight theory at any rate :)

[Ding]

Another thing, Tomi.

Don't be too happy that Elop is leaving Nokia.

Chances are, another Microsoft stooge will succeed Elop. I think it might be Chris Weber. Nokia is now infested with Microsoft rats after successive layoffs and new hires since 2011.

[Matt Lacey]

Could Microsoft really afford to walk away from a mobile OS entirely or start again? I think not.
If the purchase is driven by Balmer (& Elop) could this be cancelled if Balmer goes before the purchase is completed (and is replaced by someone other than Elop-obviously). - Now that would kill Nokia (handset division).
Future of Windows Phone now depends on what operators think of this. If they're really against Microsoft then all the work that Nokia did to get their devices in stores will be undone and Windows Phones will stop selling.
Microsoft need to stop trying to sell devices based upon the name of the OS. People don't buy devices based on the operating system but MSFT keep trying to push this.
Will the "Nokia Lumia" brand translate to being "Microsoft Lumia" or "Windows Phone Lumia"? - It will take some real marketing magic to achieve this.
Still more questions than answers...

[Ding]

@Matt Lacey

Wrong. People do buy devices based on the OS, but most people avoid anything Microsoft like the plague.

Other than apps, most people simply do not want Bing, IE, Xbox Live and Skydrive shoved down their throats.

Now Microsoft thinks making in-house Windows phones is the solution. Apparently, it hadn't learnt its lesson from Surface.

[michael]

I don't understand why Microsoft needs Nokia, except patents. It didn't need to buy anybody to make, market and sell Microsoft Surface (never mind the failure of the product). Nokia's name is as technologically attractive in mobile business today as is Kodak.

Hopefully Microsoft will dump Nokia name alltogether and just market the phones with it's new window logo.

[Bruno]

v900

obviously, Tomi was wrong about that. everybody was wrong. who would have thought that Elop was destroying multibillion company on purpose? that the whole plan from burning memo wasn't to save company(?!), but to serve it on silver plate to Microsoft. Tomi said "Elop is delusional...", no, he was aware what he was doing and that wasn't in nokia's best interest. it was in Microsoft's best interest, but on Nokia pay roll!! how is that even possible?! he ain't delusional, he did his job done very well.
I ain't no law expert, but what he did, sounds like typical conflict of interest. ain't that against the law?

[[email protected]]

For Elop, his mission is accomplished. He took over a $110bl Nokia giant and sold it to Microsoft after 2years for $7bl! That was his goal all along! Make no mistake about it! As much as it sounds as a conspiracy, the Americans wanted to strip Europe of its last technology giant. Even if Microsoft does not gain by all this, this whole debacle stinks of New World Order.

This was pure sabotage. If anyone tells you different don't be a sheep and believe it.

If I was Finnland I would break away from the European Soviet Union and try to restore Nokia, maybe ban all competing imports etc., I would ban anything coming out of America!!!!

[KPOM]

There should be a lot of scrutiny on the board. The whole episode lends a lot of credence to the idea that the hiring of Elop was just a back door way for Microsoft to snap up Nokia's core assets on the cheap. Gates still must believe that Microsoft has a future in wireless, or at least that they can't afford not to be a player. If Elop is the next CEO I will seriously question that strategy.

[Janne]

@All bashing Tomi because of his predictions. Maybe you should actually re-read the passages in the previous blogs, such as this one a while ago:

"Now we can see with hindsight, what has been going on. We know now, that yes, Nokia was under very serious discussions of being sold (as I predicted) to Microsoft. Those discussions broke down this February. So there had been very serious ongoing takeover talks last year (when I said Nokia would be sold soon - and obviously I was wrong, but I had obviously still had a good hunch, I had sensed a very likely scenario)."

So Tomi was right, but was fooled because of the news released. In reality the talks continued.

And now that Microsoft actually bought Nokia, as Tomi originally thought it might, it still can be a disastrous move. Ballmer's great restructuring project goes on even though the previous devices have proven to be a huge loss. How many billions more is thrown into the pile is yet to be seen...

[Legal Egal]

From a legal p.o.v.

Stephen Elop committed Corporate Breach of Trust. When he took over Nokia he was given the command to act in best interest of the company. It is now clear and can most probably be proven in a court of law that he did not. All his actions were in favor of his former employer Microsoft , who now picks up a seriously devalued company for a pittance. Stephen Elop is probably not in Europe right now and I doubt will be in the foreseeable future as he misled European share holders and can be held accountable for the fastest fall of a Multi Billion Euro company in the history of Tech Europe. Furthermore the deal is still pending share holder approval. It will take one share holder to say no and report Stephen Elop to European Union Court.

If I was approached to take this case to court I would as this is a no brainer.

Furthermore Europeans still do not understand American Capitalism is NOT compatible with European Capitalism.

Breach of trust

BREACH OF TRUST. The willful misappropriation, by a trustee, of a thing which had been lawfully delivered to him in confidence.
2. The distinction between larceny and a breach of trust is to be found chiefly in the terms or way in which the thing was taken originally into the party's possession; and the rule seems to be, that whenever the article is obtained upon a fair contract, not for a mere temporary purpose, or by one who is in the. employment of the deliverer, then the subsequent misappropriation is to be considered as an act of breach of trust. This rule is, however, subject to many nice distinctions. 15 S. & R. 93, 97. It has been adjudged that when the owner of goods parts with the possession for a particular purpose, and the person who receives them avowedly for that purpose, has at the time a fraudulent intention to make use of the possession as the weans of converting the goods to his own use, and does so convert them, it is larceny; but if the owner part with the property, although fraudulent means have been used to obtain it, the, act of conversion is not larceny. Id. Alis. Princ. c. 12, p. 354.
3. In the Year Book, 21 H. VII. 14, the distinction is thus stated: Pigot. If I deliver a jewel or money to my servant to keep, and he flees or goes from me with the jewel, is it felony ? Cutler said, Yes : for so long as he is with me or in my house, that which I have delivered to him is adjudged to be in my possession; as my butler, who has my plate in keeping, if he flees with it, it is felony. Same law; if he who keeps my horse goes away with, him: The reason is, they are always in my possession. But if I deliver a horse to my servant to ride to market or the fair and he flee with him, it is no felony; for e comes lawfully to the possession of the horse by delivery. And so it is, if I give him a jewel to carry to London, or to pay one, or to buy a thing, and he flee with it, it is not felony : for it is out of my possession, and he comes lawfully to it. Pigot. It can well be: for the master in these cases has an action against him, viz., Detinue, or Account. See this point fully discussed in Stamf. P. C. lib. 1; Larceny, c. 15, p. 25. Also, 13 Ed. IV. fo. 9; 52 H. III. 7; 21 H. VII. 15.

[Mandar]

Now Microsoft owns the best Mapping software/data in the industry. Hope Bing maps is replaced by Nokia Drive/Maps everywhere

[Henry]

Hi Tomi, I'm a former Nokia engineer; I took part in the design of the last Symbian smartphones before being caught up (as other tens of thousands) in the redundancy party organized by Mr. Elop. I've been following and appreciating your analysis for a while. Last time I suspected anyway that things could be turn different from what you expected. Why did Nokia buy the Siemens quote of NSN, not having much cash remained? What could have done Microsoft with Windows Phone, if also Nokia had changed its route? No other smartphone vendor is backing Windows. I think this time you've reasoned more with the same hope of many other Nokians to see thing as they were, than taking into account that at high level only money and cynicism reign supreme. I have anyway to thank you, on behalf of many others, for having told publicly the true(sad)story of this glorious company.

[TimoT]

This could be actually good news for Nokia. It is possible that smart phone markets will go the way of pocket calculators this decade. The cash cows of 80's turned into 90's market dogs with fierce price competition.

Already you get in Asia very decent smart phone for about 200 dollars and I think the average price will go down to about 100 dollars. Technologywise designing and manufacturing an average smart phone is not that high tech anymore. We are entering the "any X is good enough" markets like with PCs in the early 2000's.

[chunk]

I invite all of you to put a good thought with the hastag #ElopTrojanHorse to let the world know who is this a*shole

[ejvictor]

Crap soooo close I said elop gone October 17th