Well, it's official folks. In case you missed it on account of a busy Labor Day weekend, Microsoft will be acquiring Nokia's Devices & Services business for a cool $7.2 billion in cash. In addition to bringing some hardware into the mix, Microsoft will also be acquiring Nokia's patent portfolio and licensing them out. The breakdown is $5 billion for Nokia's Devices and Services business and $2.2 billion for its patents.
Coupled with the announcment that Microsoft CEO Steve Ballmer is on the way out, one has to wonder just what the heck is going on inside the hallowed halls at Redmond. Indeed, no matter how you look at it, it seems that Redmond is adrift in a sea of chaos and confusion.
Microsoft will, at the same time, be in control of both the software and hardware (like Apple) but will also be expecting third parties to continue licensing out the Windows Phone OS. Google, so far, has been able to straddle this line with its Motorola acquisition, but Microsoft is already playing a desparate game of catch up and it seems unlikely that it will be able to play both sides of the coin successfully.
In an absolutely must-read article on MobileOpportunity, Michael Mace takes us through a number of reasons why the Microsoft/Nokia deal is, at it's core, downright confusing at best, and a mind-numbingly horrible business strategy at worst.
First off, Mace points out that combining hardware and software is no trivial matter. To that end, who else in the tech sphere has been able to control the technology stack from top to bottom and make it work for their bottom line? Apple is really the only company that comes to mind.
There already is an Apple. You can make a good argument that Cupertino has already used up most of the customers who are willing to pay extra for a value-added smartphone or tablet, and that the remaining customers are mostly buying on price. That creates the possibility that Microsoft (and the Motorola part of Google) will end up with the worst of both worlds: an Apple-like expense structure but with commodity margins. Google can afford that since it has the web advertising business to subsidize it. Microsoft, with restless shareholders and all of its cash cows under threat, has much less room to maneuver.
Further, the Microsoft/Nokia deal will, as far as I can tell, do nothing to cure the inherent problems that currently plague Redmond. Windows 8 hasn't been all that exciting; Windows Phone, despite nice reviews, isn't gaining significant traction in the marketplace; Surface tablets have seemingly been dead on arrival; Microsoft is in search of a new CEO.
And the list could go on and on.
Put simply, Microsoft already has a lot of issues to deal with and now it's swallowing up a completely new corporation with its own unique business culture and hundreds of thousands of employees.
As Mace writes, Microsoft has willfully entered into a "ridiculously complex" situation.
There's a lot to digest and speculate on as it pertains to Microsoft's latest acquisition. But at first glance, one underlying question seems to ring loudest of all - "Why?"