Why Microsoft should have bought BlackBerry instead of Nokia

It's probably too late for BlackBerry, but it's still important to look at what Microsoft passed up in favor of the expensive Nokia.

As most everyone knows by now, last week Microsoft agreed to buy Nokia’s handset business. And as most people also probably know, BlackBerry put new effort into a strategic review for finding a buyer for itself.

This is backward. Microsoft should have bought BlackBerry, not Nokia. And Nokia is the company that should be casting around for a buyer.

Why Nokia?

Sure, Microsoft had some good reasons to spend $7.2 billion on Nokia and its patents. Most notably, the two companies were already in bed with one another, as Nokia currently makes the vast majority of the Windows Phone devices.

Perhaps just as importantly, Nokia was headed by a former Microsoft exec – Stephen Elop - who is now considered a top candidate to replace Steve Ballmer as Microsoft CEO when he leaves the company sometime in the next 12 months.

But let’s face it - Nokia was already getting its lunch eaten in the smartphone business, and many observers thought its Windows Phone models weren’t much better than those that Samsung and HTC put out, seemingly in their spare time. And once Microsoft is in the business of making phones, it’s unlikely any other big players will bother to make Windows Phones.

Why BlackBerry Instead?

It’s no secret that BlackBerry has its troubles, too. In fact, the Canadian smartphone maker may have fallen even further in the market than its Finnish counterpart, and probably controls an even smaller portion of the global smartphone market. The latest version of its operating system – BB10 – was years late, and the flagship phones that use it, the Q10 and Z10, have been huge disappointments, at least in terms of sales.

But despite its very real woes, the BlackBerry brand still means something, especially to hardcore business and government customers. Those customers – especially the IT departments at big corporations – value the very things that BlackBerry has long stood for: security, manageability, email, and yes, keyboards. BlackBerry, like Microsoft, has deep, ongoing relationships with many of those enterprise customers.

Those very customers are also Microsoft’s best hope for Windows Phone. And those business concerns are the very criteria that Microsoft promotes when it sells Windows to corporate customers (well, not so much the keyboards). Those are also the areas in which Microsoft will have to excel in order to earn a meaningful slice of the corporate smartphone market. Despite an ongoing string of slightly creepy consumer-focused ads, Microsoft’s best hope to remain relevant in the smartphone wars is to concentrate on the business market. Windows Phone, backed by Nokia or not, has little hope of dethroning iPhone or Android among smartphone consumers.

Nokia, after all, is best known for flooding the developing world with cheap feature phones, not developing business-friendly smartphone technology. What’s the synergy for Microsoft there?

It’s not like Microsoft and BlackBerry were strangers, either. Microsoft’s Bing is the default search engine on BB10 devices, and Microsoft and Nokia considered a joint bid for BlackBerry back in 2011.

Microsoft could even have saved a billion bucks buying BlackBerry instead of Nokia. At Friday’s 4pm price of $10.84, the company’s market cap is just $5.59 billion. Best of all, BlackBerry is also a foreign company, meaning Microsoft might have been able to use its overseas cash, as it reportedly plans to do with the Nokia deal.

It’s probably too late now – at least for BlackBerry’s handset business, though the company’s security technology and network could still be attractive. Microsoft has made its bed, and all three companies will have to lie in it.

Even so, it can’t hurt to spare a moment to think about what might have been.

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