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Nokia CEO Stephen Elop
"I'm gonna make him an offer he can't refuse."

Nokia ruffled more than a few feathers when it announced that it would be shacking up with Microsoft when it comes to smartphone operating systems. Feeling the heat from smartphone operating systems like Apple's iOS and Google's Android, Nokia is winding down its efforts with MeeGo and Symbian in order to embrace the nascent Windows Phone 7 (WP7) operating system.

Now, a new report from BusinessWeek suggests that Nokia was offered a sweet deal to go with Microsoft’s WP7 operating system over the rival Android OS. BusinessWeek says that Nokia will receive roughly $1B as a part of a 5-year deal with Microsoft.

Microsoft, of course, will also profit handsomely from its $1B investment if Nokia's WP7 offerings take off in the marketplace. Unlike with Google's freely available Android OS, Nokia will pay Microsoft a royalty fee for each WP7 handset that it sells.

“This gives Microsoft scale and allows Nokia to rip out costs,” said Colin Gillis, an analyst at BGC Partners in New York, who recommends buying Microsoft shares. “Microsoft is getting the platform boost.” 

Although $1B USD is a nice motivator to adopt WP7, Nokia's Stephen Elop claims that Nokia would have gotten lost in vast sea of me-too Android devices, and that the Microsoft partnership gives it a chance to shine. “A decision to go with Windows Phone creates a very different dynamic. Windows Phone is a challenger. It becomes a three-horse race,” said Elop according to Mobile Beat.

Nokia’s Symbian operating system has been under a constant assault from Android. Android overtook Symbian as the world’s best-selling smartphone operating system in Q4 2010 (33.3 million units versus 31 million units).

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1 billion or not...
By Saist on 3/8/2011 12:50:23 AM , Rating: 0
I guess I question the value of accepting a 1 billion bribe when the plan for the accepting the bribe means:

1: gutting your company of all it's internal value (Symbion, Meebo, QT)

2: putting out a product nobody wants (Windows Phone 7)

3: losing marketshare because you currently put out products nobody wants

4: torque off all of the developers who were supporting the stuff that was valuable (Again, Symbian, Meebo, QT)

5: torquing off shareholders who are calling for the heads of everybody involved in taking the bribe.

Nokia's made some pretty bone-headed mistakes over the years, and for the most part the company has survived through blunders such as the Side-talking NGage. At this point I seriously doubt Nokia's ability to survive through this particular blunder. The biggest problem is that what Elop wants, and what the shareholders expected, are two different things.

If Elop is able to carry out the plan laid forth by Microsoft, Nokia will be gutted of all of it's internal value. Technicians, programmers, and everybody familiar with the packages Nokia owned that actually had value, will be out of jobs or working for competitors. This means that Elop's vision of Nokia will become a company without the hardware or software expertise to separate themselves from other vendors.

If the shareholders have their way, Elop and the Microsoft deal will be kicked the curbe. However that shareholder meeting when the alternate plan is to be put forth for a vote, as well as the vote to kick Elop to the curb, is quite a ways off. There's a very good chance that Elop and Microsoft will have gutted everything that was valuable by that time. That means that when Elop and Microsoft get kicked to the curb... Nokia won't have anything left.

It is a delicate gamble by Elop. If he's able to carry out Microsoft's plan, shareholders won't have any choice but to go along with the Microsoft deal and face bankruptcy when products don't sell and marketshare shrinks to Microsoft's typical mobile phone share... less than .001%. It's either that, or face immediate bankruptcy from having no internal value, lots of non technical employees to take care of, and no chance of hiring any technicians to come in and rebuild the hardware and software development teams. Bottom line, Elop gets a fat paycheck from Microsoft, Microsoft removes a competitor from any kind of contention, and Nokia gets screwed.

At this point, given what Elop and Microsoft intend, I think Nokia as a company is dead.

"If they're going to pirate somebody, we want it to be us rather than somebody else." -- Microsoft Business Group President Jeff Raikes

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