Microsoft's Gates, Nadella, Bates Initially Opposed Nokia Acquisition; Said Microsoft Should Stick with Software
March 5, 2014 1:33 PM
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Former CEO Steve Ballmer threw a fit until he got his acquisition
Microsoft and Nokia have had a close relationship over the years, where Microsoft provided the Windows Phone software and Nokia made the hardware. But when former Microsoft CEO Steve Ballmer wanted his company to become a hardware maker, many top executives disagreed with such a move -- including current
CEO Satya Nadella
, Ballmer was set on getting his way when it came to the acquisition of Nokia's Devices and Services division last year, despite opposition from top-ranking execs in the company. Ballmer reportedly threw a fit that everyone could hear last year when he learned of their opposition.
Microsoft co-founder and current Technology Advisor Bill Gates along with Nadella and former Skype CEO in charge of Microsoft's business development Tony Bates all initially opposed Microsoft's move into hardware, as well as the idea of an expensive Nokia acquisition.
The board didn't back Ballmer's plan to acquire two Nokia units at the time, but after Ballmer's hissy fit in June 2013, the board signed off on a
$7.2 billion USD purchase
of Nokia’s mobile phone business. Nadella had also reportedly changed his mind about the Nokia acquisition, saying it was a good idea after all.
“Nokia brings mobile-first depth across hardware, software, design, global supply chain expertise and deep understanding and connections across the mobile market,” said Nadella. “This is the right move for Microsoft.”
Bates, on the other hand, remained strongly opposed. Earlier this week, it was announced that he is leaving the company immediately, which could be a result of being passed up for CEO earlier this year. There could also be internal frustrations with his opposition of Microsoft's move toward hardware.
But Microsoft team members had a right to worry about the company's future in hardware, as the past has been quite telling. For instance, Microsoft's first homemade tablet called Surface was largely a flop at launch in October 2012. Windows RT was seen as a half-baked Windows product that didn't run legacy apps, and the Windows 8 Pro version was much too expensive for the typical consumer, and Windows 8 in general created a storm among users who just wanted their Start button back and the live tiles on their desktops to go away.
In July 2013, Microsoft reported the largest earnings miss in at least a decade and took an unexpected
$900 million charge
due to the Surface flop.
Ballmer announced that he would be
retiring as Microsoft's CEO within a year
last August, and Nadella was named CEO in January.
Nadella is currently shaking up the executive ranks and unraveling certain parts of Ballmer's restructuring process.
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RE: I'm not sure if it was a good idea in the abstract but...
3/5/2014 9:16:45 PM
Waiting too long to address a changing marketplace is a common mistake of big companies (Google, by contrast, did well to respond to the iPhone ASAP).
It's the root cause of Nokia's downfall. They were between a rock and a hardplace when Elop took over, as they should have switched to Android a year earlier. At that point, the choice was starting from zero with Android or taking a risk (and a $250M/quarter bribe) from MS.
And, as you mention, it's why MS is so far behind in mobile. They came up with a good OS, but you can't twiddle your thumbs for that long without consequences.
I also agree that entering hardware was necessary for MS's long term presence in mobile.
RE: I'm not sure if it was a good idea in the abstract but...
3/6/2014 7:50:04 AM
Completely agree with you here. If nokia moved to Android 1-2 years earlier then they would be Samsung today... but they didn't, so when it came time to move to a new platform then they had the option to become another "Me Too" company attempting to compete with Samsung... or take over a niche market. Making the move when they did, Android would have been suicide. With no other OS contenders, WP was the only right choice available. A few years later then perhaps FirefoxOS or Ubuntu's phone OS would be an option... but they did not exist at the time.
On the other hand, MS has had a rough time with WinMo and WP7/8 because the company wanted to make a good smartphone, while the board just wanted a patent generating machine without the liability of a consumer product. Because of this WP has a lot of great technology built in... but it is often incomplete or short sighted from a consumer viewpoint. Thankfully (and I say thankfully because I am a WP user) MS has done a 180 on this viewpoint over the last 2 years, and they are really developing the OS as a true product now. Where winMO and WP7 had major issues, WP8 is much better. WP8 is still lacking a lot of features, but the WP8.1 leaks show that almost all of those features will be addressed this year.
It is a company playing catchup, but they were catching up. 2013 was all about catching up on hardware support, and they did that successfully. 2014 is all about feature support and building the app store. 2015 will be all about WP9 and completing the merge with winRT in order to potentially add more PC-like features, and fix development and store issues to get app developers to take them seriously. They are constantly on the verge of "too little too late", but so far have kept up good enough to not be blackberry. And at least they have a roadmap in a time when Android and iOS seem to be stagnating. MS may never catch up in the US phone market, but I think that a year from now the landscape will look very different in a worldwide perspective with WP and iOS neck and neck in most markets.
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