Today Microsoft announced that it would be acquiring Nokia for a sum of $7.2 Billion in cash, buying Nokia’s devices, service business and all of Patent portfolio. This was a much cheaper deal than Google’s acquisition of Telecom giant Motorola, in pursuit of building Patent portfolio and saving Android platform.
3 years ago, Microsoft planned to acquire Nokia to complete its smartphone portfolio. Buying Nokia was not only unaffordable, none of the board of directors in Nokia were in favor of that. Microsoft desperately needed a hardware platform and they couldn’t eye any among HTC, Samsung, LG, Motorola, which were all Android oriented. Nokia, among the best hardware manufacturers, was on Microsoft’s vicious targets. So someone smart enough at Microsoft had a strategy that could pay-off well in the future. Instead of going for M&A talk with Nokia, they planted a trojan horse named Stephen Elop.
From January 2008 to September 2010, Elop worked for Microsoft as the head of the Business Division, responsible for the Microsoft Office and Microsoft Dynamics line of products. He was among the most senior people in the company. In September 2010, Elop took Nokia’s CEO position, replacing Olli-Pekka Kallasvuo, and becoming the first non-Finnish director in Nokia’s history.
Soon after Elop became the man in charge, he declared Nokia was being hit hard by competition and called it a “Burning Platform“. He had a plan. A plan very different from the competition. Where everyone else was adopting Android to survive, he insisted on doing the reverse and said “using Android is like pissing in own pants for warmth”. These words of course outraged anger among Android lovers, but nonetheless, man had a strategy in mind. He declared that company would stop developing Symbian and other Open source mobile OS called MeeGo (in partnership with Intel) and would bet the company on one single OS: Microsoft’s Windows Phone. This was a very risky deal. Windows Phone 7 (at that time) was new and had no user base or apps. Which CEO bets his company on an immature, unproven platform? The downfall was evident.
Years after, company has run out of cash flow and holds it place at the verge of falling. Microsoft can afford it now, Microsoft buys Nokia for less than 8billion, for which market value was more than double before Elop joined. Thats how business is done.
Disclaimer: These are purely our own analysis.