Om Malik on the Microsoft-Nokia deal

Today, Nokia announced that Microsoft will buy its devices business for shade over $7.15 billion in an attempt to mimic the Apple/Google strategy of owning the hardware, software and services. The reports of this possible merger had emerged as early as June 2013, according to the Wall Street Journal.

Om isn’t very optimistic, especially regarding the Nokia side of the acquisition.

If anything, Elop’s tenure at the top of Nokia will be remembered for the years when Nokia became irrelevant in the the mobile handset business. In a post, “The End of the (Nokia) Raj”, I hinted at a future of irrelevance for Nokia. The fall from grace came much sooner than even I thought. Elop is now being widely tipped to take over Microsoft as its next chief executive, replacing outgoing Microsoft CEO Steve Ballmer. Given his track record, if I were a Microsoft shareholder, I would have to pause and gulp hard before putting the future of the company in his hands.

He also doesn’t seem too excited about Microsoft’s future chances in mobile.

Microsoft’s legacy as a PC monopoly holder made it incapable of handling the fast changing, rapidly shifting post-mobile world. And now for the next year Microsoft will be distracted by integrating the two companies — all at a time when Samsung will be releasing a barrage of new phones, Google will be improving on Moto X and Android and, lest anyone forget, Apple will have a trick or two up its sleeve. Oh, by the way, there is that other Seattle-based company: Amazon has been quietly working on its own phones and has plans to take on the current smartphone establishment. And they don’t even care about making a profit — they just want marketshare.

I think that Nokia wasn’t going anywhere, even after Elop’s ‘burning bridge’ speech and going all-in with Windows Phone. Praise for the hardware and OS isn’t good enough in this era of mobile. You need results, either in profit share or market share and right now it’s a two horse race with third place lagging way behind.

It’s a bargain buy from Microsoft’s perspective, especially given Nokia’s past dominance in this market. I don’t know how smooth the transition will be for Nokia staff, but their hardware engineering talent is undeniable. The Nokia brand will live on for a few years to come, but I think they will contribute most to the Surface line of products, even perhaps help develop the rumored Surface phone. Nokia is effectively going to be Microsoft’s hardware wing, which isn’t a bad thing. It’s just that all of the Redmond giant’s internal bureaucracy and slow moving nature could hamper the quick progress that it sorely requires in this area.

Elop as the new CEO of Microsoft is a possibility but a whole ‘nother level for the Canadian. He is well versed with Microsoft after being a senior executive there for many years before taking the Nokia job. But mobile hardware is only going to be one part of Microsoft’s diverse and quite frankly mammoth business. While it would be unfair to judge him based on his performance for a company clearly on the decline when he joined them, he just doesn’t seem like the right person for the job to me. It would be a risk, but Microsoft is definitely in a much better position than Nokia was a few years back. The real question is whether he can handle all of the various divisions within the company simultaneously, something he would have never had to do at such scale before.

The bottom line is that it seems that Apple had it right from the beginning and once again Microsoft is the last one to the party after them, Google and even Amazon.