Microsoft Buys Nokia: Another Swing and a Miss

It is difficult to understand how Microsoft can continue to make one bad move after another, but the hits (make that misses) just keep on coming.

The news that Microsoft is buying a number of parts of Nokia came as no surprise to many, including me. Indeed, I was in Helsinki last week, and there was already some discussion then of what such a move might mean. More on that below, but for the moment, it appears that Microsoft wants to continue to evolve in a direction that will make it more Apple-like. Microsoft already has its own stores (the one near me is literally two doors down from the Apple store; guess which one is almost always so crowded it's hard to move around, and which one looks like a ghost town), and, well, if Apple has the vertically-integrated iPhone, then shouldn't Microsoft have it's own vertically-integrated mobile line as well? And isn't buying Nokia a bit like Google buying Motorola, for the intellectual property and to get a proprietary handset line? The channel conflict issue I raised in Google's case obviously carries over to MS, although, as I predicted, they don't seem to be making a big splash with Windows Phone, so the downside here might be quite, um, nonexistent. So why spend $7.5B like this? Just to have a proprietary handset line that still won't sell?

Well, then, perhaps it's because Nokia is headed by former MSer Stephen Elop, who adopted Windows Phone just to be different. But Elop, in three years at the helm, has creamed Nokia's market valuation - that's what different for difference's sake will get you. There was some talk on the business TV channels yesterday about how MS wants Elop back to replace retiring (and also somewhat-less-than-successful) CEO Steve Balmer, but anyone expressing this opinion has got to be kidding, right? Paying $7.5B to get products that won't sell and a loser CEO? Really?

OK, again, I've not said anything nice about Microsoft for, well, ever. My disdain for the utter junk this company produces is unbridled. Why anyone would spend money with these guys, other than perhaps for the buggy and overpriced but still standard-of-the-industry MS Office, is beyond me. My previous forecast regarding the essential irrelevance of Windows Phone (and the rest of Windows) still stands - it is not at all clear to me how Microsoft's continuing excuse for strategy will produce good results for both customers and shareholders. Regarding the latter, by the way, MSFT was down 4.55% yesterday on this news. The stock has vibrated between 20 and 30 for more than a decade, with the recent uptick to above 36 a great time to get out, assuming there was ever a reason to get in.

So, then, back to Helsinki. Perhaps MS is assuming they'll just lay off all those Finns and the stock will recover - layoffs usually follow acquisitions, after all. But the Finnish welfare state will undoubtedly say not so fast to that - and I wouldn't be surprised if the government there tries to block the deal altogether. Finland is a very small country and Nokia, even in its current rough shape, is a big part of the economy. MS may be buying themselves a world of hurt here - nothing new, of course, for the gang that can't shoot straight. It thus remains difficult for me to imagine how MS, like BlackBerry, will ever be a serious player in mobile going forward. This latest boneheaded move is yet another indication that a breakup (they should have taken the Justice Department's deal, lo those many years ago) is still the best way to glean any value from this otherwise sorry mess.

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