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...
3/6/2014 11:11:51 AM
I don't agree that this was necessary. The question for Microsoft is what they want to be ten years from now.
If they insist on being a consumer, as well as a business oriented company, then perhaps, this was a good move. But the real question is whether they should continue trying to be a consumer company. The truth is that they haven't been very successful at it.
I know some people will fry me for saying it, but their Entertainment Division has been losing money ever since the XBox first came out. It's lost over $12 billion over the years. Despite their attempts to hide those losses, first by adding the small devices division into it, and the latest, by adding the income from Android licensing, seen by digging into the financial statements, has shown that the division lost $1.25 billion in 2013. There seems to be no way out io this.
They're losing hundreds of millions each, every year, on phones, tablets, Bing, etc.
These are objective facts, seen in their own financial statements.
On the other hand, their Server and Tools are doing very well. Office is still doing well, but sales increases are being dragged down by the poor reception of Win 8, another attempt to rope consumers in.
There is a lot of sentiment out there for Microsoft to drop these, what are being called "distractions", so that their business divisions can concentrate on what they do best, and to stop worrying about how they can integrate with the consumer divisions, which are doing poorly.
I understand why Ballmer wanted to buy the phone division of Nokia. The real question is whether they should just drop phones altogether. Despite sales increases over the year, there was a substantial Nokia phone drop in sales during the last holiday quarter, which is a time when phones sales increase. Overall, Win Phone lost marketshare during 2013, after gaining some earlier in the year.
RT seems to be done, and Pro tablets aren't selling very well. Of all the embarrassment, a friend of mine, an executive with IBM, bought a surface Pro last year. Three months ago, IBM gave him an iPad Air. What does that say?
Perhaps Microsoft is barking up the wrong tree.
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