13 ms·

The Deal That Makes No Sense

204 points by monkbent 13y ago

deleted 13y ago
[deleted]
- arethuza 13y ago
  Sometimes I think these really big acquisitions are based on the "Politician's syllogism": 1. We must do something 2. This is something 3. Therefore, we must do this http://en.wikipedia.org/wiki/Politician%27s_syllogism http://en.wikipedia.org/wiki/Politician%27s_syllogism
  - seabee 13y ago
    I wouldn't limit it to the really big acquisitions. If the market says jump, the desperate company does it ASAP and invariably bumps their head on a sharp pointy object.
devx 13y ago
I love this guy. He almost always "gets it". If Microsoft was forced into buying Nokia's phone business, then if I were a WP phone customer, I'd be even more worried for this division's future, because it means they don't really have a clue what to do with it in the future, if they only bought it so Nokia doesn't go bankrupt (they were running out of money). It also doesn't help that Microsoft has historically had pretty incompetent management, horrible culture between divisions and inside divisions, and it's now in the process of reorganizing and getting rid of its CEO (which was also sudden, and unplanned).
beloch 13y ago
The notion that Nokia was about to jump-ship or simply go under is certainly plausible. Another possibility is that MS wanted to start using Nokia's resources for their other hardware projects and it was going to be awkward slicing off teams from Nokia and having them start working under a MS department. MS might not be selling as much hardware as Apple, but their XBox line is the current king of consoles. With a new console-war brewing, MS is probably desperate for any edge they can get over Sony. Who knows? Nokia might just have something that can help.
- hannibal5 13y ago
  I think Microsoft sees Smartphones as strategic must have for long term. MS saw that Nokia is the only player in the Windows market and Samsung is never going to be big on MS. They just bought the hardware and are making Windows phones into closed platform like iPhone is. I don't think that Samsung and others are going to continue making windows phones after MS bought Nokia.
  - tankenmate 13y ago
    The biggest reason that phones are a strategic "must have" is the massive drop in desktop sales.
    - panacea 13y ago
      No. Phones (or watches) as access points to 'your digital life', even if managed on tablets/laptops/desktops, are the digital wallet in your pocket.
  - fnordfnordfnord 13y ago
    Samsung and others weren't going to continue making windows phones before MS bought Nokia, either.
redact207 13y ago
Can I add my own conspiracy theory and put forward that MS wanted to buy Nokia years ago when the world was going mobile but couldn't. Then one by one, MS VPs mysteriously left their posts to go work with Nokia. Fast forward to today, MS finally buys the firm they wanted to in the beginning.
- pessimizer 13y ago
  That was the consensus amongst Nokia fans after the burning platform speech - that Elop's purpose was to drive down the price of Nokia until it was a cheap acquisition.
- asabjorn 13y ago
  The strategy to partner with MS always seems heavily tilted in MS favor. It probably makes a good business study how this can be avoided for anyone in a similar industrial position. It always baffled me that there was no successful shareholder riot because Elops strategy seemed like a self-goal no matter how it would play out.
kennethh 13y ago
Elop must have the record in destroying a company. In 5 years a company went from being market leader with something like 90% of the smartphone market to almost bankrupt. I do not think something like this have ever happened this fast.
- davegardner 13y ago
  Elop only joined Nokia towards the end of 2010. Nokia was well and truly on their downward slide by then.
- Steko 13y ago
  (1) 50% five years ago and already dropping. http://upload.wikimedia.org/wikipedia/commons/a/ae/World-Wide-Smartphone-Market-Share.png http://upload.wikimedia.org/wikipedia/commons/a/ae/World-Wid... (2) Elop arrived in 2010 and Nokia was basically already done for.
  - speeder 13y ago
    I must disagree. In 2010 Nokia was 70% of Brazil smartphone market and their share was still rising, very fast. Symbian phones were known to.be solid, fast, and had apps and games ( even a port of counter strike! ) As soon Elop announced Symbian death, the whole thing tanked, and I cannot help but feel that Elop is stupid.
    - skc 13y ago
      This would seem to imply that Brazilian consumers read the burning platform memo. I highly doubt that. I have a huge problem with people flat out claiming that Symbian was an acceptably competitive phone offering in 2010. That's a bald faced lie in my opinion.
      - speeder 13y ago
        It was, because it was what people could pay. Symbian phones were much cheaper than a iPhone, and Android had not yet really arrived in force. Nokia was known here for making sturdy, durable phones that you could use for a long time. If they paired that with also having a solid app ecosystem for the most popular brazillian uses (like, Facebook, Mail and Youtube) they could have easily won the smartphone wars here. Instead they dumped Symbian and went for Windows Phone, allowing Android to get their former place in the market. Mind you, most Android phones here are now no-name chinese ones, Nokia left the cheap but solid phone market, and cheap (but not-solid) phones took over the vacuum.
polemic 13y ago
> "...I think Microsoft ought to abandon Windows Phone. The war is over, and iOS and Android won." That's remarkably short-sighted. The first iPhone was released only 6 years ago, Android 5 years ago. You really think that Microsoft - a company with nearly infinite runway, an enormous R&D investment and serious history - is going to down tools after a few years of frustration? Not likely. The prize is too big and consumers too fickle to just give up.
- Steko 13y ago
  Agreed. Phones aside, the viability of Chromebooks goes a long way to showing how open the OS market is compared to the desktop market a decade or two ago.
- telephonetemp 13y ago
  I agree. I don't see why this isn't like saying > "...I think Microsoft ought to abandon the Xbox. The war is over, and Sony and Nintendo won." a decade or so ago.
  - venomsnake 13y ago
    Except you have tabula rasa in console business every few years so you could jump anytime if you have the money. And games as entertainment products rarely have legs longer than a generation - we the PC master race are spoiled with decade long backwards compatibility but in the console world it is rarely so. And entertainment business (because the console is just a hardware dongle) is different beast.
    - freehunter 13y ago
      I would argue that any investment in the Halo series, God of War series, or Mario series is a big draw towards buying the next console the same as the console you currently have. Yeah, you'll have to buy Halo 5 on the Xbox One, but you've already played Halo 1-4. Switching to Killzone halfway through the series won't scratch the same itch.
lotsofcows 13y ago
Elop's job was to drive to the price. Microsoft wanted, and now has, the IP.
JulianMorrison 13y ago
Microsoft wanted an ecosystem of competing handset makers like Android, where they could just make the OS and rake in the money; they have realized they aren't going to get it, and the one handset maker who took the sucker bet was dying fast. So (I predict) they have decided to switch to the XBox model, where the hardware is in-house, subsidized, and used to gain market share.
lazyjones 13y ago
Microsoft is probably aiming to become a patent troll in the long run due to their lack of innovation. They already have many patents they can extort future innovators with, so picking up Nokia's (reported to be worth $6b) makes sense.
- jhonkola 13y ago
  They didn't buy Nokia's patents. They bought Devices & Services business unit (the one making the phones) and a 10-year (non-exclusive) licence to Nokia's patents, which obviously are needed to make the phones. Does not sound like a patent troll move on part of Microsoft.
shadowmint 13y ago
I don't agree with all the things in this article, but there certainly rings a bell of truth in there somewhere. A 5.44 billion EURO transaction to acquire a company that is already in a strategic partnership with you and working exclusively with your platform doesn't make sense. My vote also goes for Nokia being financially in trouble, and M$ have their hand forced by the fear of a collapse in Nokia would gut the distribution channels for all the flagship windows phone models. Worse, what if word got out and someone else bought them? ...wait, no, that would mean Microsoft would have some special insider knowledge of Nokia's finances that no one else was party to. Surely not.
- andrewfong 13y ago
  > ...wait, no, that would mean Microsoft would have some special insider knowledge of Nokia's finances that no one else was party to. Surely not. Not really an issue if the board approved going to Microsoft with the financial information first. Moreover, when negotiating the strategic partnership, Microsoft may have gotten a right of first negotiation, that would legally entitle it to first dibs on the acquisition and certain "insider knowledge" anyway. Ultimately, shareholders might still have to approve the transaction, but there's no insider trading issue with reaching out to potential acquirers on the downlow.
  - yulaow 13y ago
    So, since the begin the Board was aiming to an acquisition by microsoft after nokia would be so in debt that the total cost would drop? It seems like the board, since now, has made the interest of microsoft and not nokia.
    - tanzam75 13y ago
      Nokia does not have a net debt position. They have about €2 billion of net cash. After the Microsoft acquisition, €7 billion.
- maaaats 13y ago
  The article is full of errors and unbacked claims. > ... adding on a mobile phone business that Microsoft probably should abandon ... Why should it be abandoned? Just because the author isn't a fan of WP8? > have argued that Stephen Elop made a massive strategic error by choosing Windows Phone over Android; ... It would have been to Nokia’s benefit to have everyone running Android, including themselves. Not necessarily true. There's only one manufacturer making money on Android at the moment, Samsung. When Elop got aboard, Nokia was already waaay behind. It's not like he drove them down, he merely tried saving them. Choosing Android might have gone better, but probably not. At least it was better going for WP than sticking to their own, dying systems.
Yuioup 13y ago
No way they weren't forced. This was planned all along. (Disclaimer: I didn't read the article. I just disagree with the headline).
- objclxt 13y ago
  To be honest, I doubt it was how Microsoft planned it turning out. It certainly wasn't Plan A. Microsoft had already made a significant cash injection into Nokia. Plan A would have been for the Lumia handsets to be a massive success, and for Windows Phone to gain significant traction. Although you could argue there has been some progress towards this, it hasn't been fast enough for either Microsoft or Nokia. Nokia's current strategy with Windows Phone simply isn't working. They're at a point where they either a) change the business plan, or b) find another source of cash to pay the bills. Since 'changing the business plan' in this case would have been hugely detrimental to Microsoft the acquisition was inevitable, but far from ideal for both parties.
ThomPete 13y ago
they didnt buy Nokia, they bought part of Nokia no?
tzury 13y ago
People are giving advises all over the web, as if, getting to a point where you have $7B to spend is not a result of a series of wise decisions and solid strategy. I am not a Microsoft fan to say the least, but boy, we understand that this is all your personal opinion, etc. However, have you ever touched or got near by a pile of a billion dollars, that you allow yourself to make such strong opinion about? Did you ever have 1% of that money, or .1% of that money? Everyone has the right to have an opinion, but please, assume "they" know facts and figures you don't.
JonoW 13y ago
I'm not sure why so many are predicting WPs death - it's actually doing pretty well outside the US. Here in the UK it's now just under 10%. Pundits are far too US orientated.
- deerpig 13y ago
  I've never seen one in SE or East Asia, not one, in Hong Kong, Singapore, KL, Bangkok or even little Phnom Penh, and you would think MS would see WP's best chance was to attract buyers who hadn't bought a smart phone before. What are they buying? Samsung mostly (and not just Galaxy, they make a lot of android phones at a cheap pricepoint), with 20-25% buying iPhones.
- yulaow 13y ago
  well that's because US has the market dimension of the full EU and more. This is why also if in EU wp is aroundd 10%, worlwide it is still on 3%. Us-Africa(that is still for more than 60% on dumbphones)-Cina-Japan do not like it for various reasons
- bhauer 13y ago
  Not only that, but with today's homogeneity in hardware, the phone market takes some time to shift. I held onto my Android phone for my two year contract and replaced it with a Lumia 920. My wife's Nexus contract is expiring in a few months and she is considering a Lumia as well. That transaction will occur about a year after my last upgrade. These things don't happen instantly now that so many devices are alike. By comparison, when we adopted the first iPhone, it was a dramatic departure from previous cell phones and we had to have it immediately. Since then, we've just waited for our contract terms to expire. Though I would interrupt my contract immediately if someone would deliver on personal application omnipresence, making a cell phone that is just a small touch-enabled view on my network and my applications.
- Zigurd 13y ago
  I would dispute that WP is "doing well" anywhere except a handful of countries where Nokia previously dominated distribution. Microsoft now owns all of Nokia's handset business, which is still 90%+ non-WP. As the S30, S40, and Asha base under WP evaporates, WP will have nothing to piggyback on in these markets.
jeswin 13y ago
The tragedy in the deal, as I hinted at earlier, is that I think Microsoft ought to abandon Windows Phone. According to the author, MS should abandon the fastest growing class of computing devices. What kind of a strategy is that?! Meanwhile, Windows Phone sales are up 77% YoY.
- rmk2 13y ago
  Growing without market-share tells us comparatively little. And to be the person for once that posts the obligatory xkcd comic: http://xkcd.com/1102/ http://xkcd.com/1102/
  - jeswin 13y ago
    On HN, you could give people the benefit of doubt and assume that market-share growth wouldn't be brought up unless the numbers were large enough. I would refrain from quoting that figure if it went from say 10,000 units to 20,000. Last quarter, iPhone sales were 31 million devices and WP8 sales were 7.4 million devices. If WP8 is selling one device for every 4 iPhones, that is indeed a decent result relative to where they started off from.
anuraj 13y ago
The deal does makes sense - MS has oodles of cash and several cash cows but no stars for the future. Other two players, Apple and Google has already brought production in house - MS has a fighting chance with this acquisition - though the larger issue of MS bureaucracy can rock this boat as well
xutopia 13y ago
The deal totally makes sense from my perspective. I wouldn't be surprised if they try really hard to buy BlackBerry for cheap as well when they falter low enough to be worth it for them.
corresation 13y ago
Nokia's most recent quarterly had them sitting on $4 billion EUR of cash ($5.2 billion), with barely any burn. I don't think the company was poised to go bankrupt anytime soon. Either Microsoft is completing a long planned purchase, or Nokia threatened to dabble in Android. Other than that the purchase is irrational.
- tanzam75 13y ago
  That was at the end of June. In August, they spent about €2.2 billion buying out Siemens' stake in Nokia Siemens Networks. This could very well have caused some short-term cash flow issues. Which also explains Microsoft's offer to finance Nokia at extremely low interest bonds. Long-term, NSN is generating positive cash flow and ought to be able to pay for itself.
mbesto 13y ago
The Deal That Makes No Sense - Was Apple Forced Into Buying NeXT?
- MaysonL 13y ago
  Thing is, Apple got a great OS and a great CEO. WTF did MS get that is at all comparable?
  - mbesto 13y ago
    Apple happily shuttled out what they had perceived was a bad CEO, just as we all sit here in our armchairs preaching the same thing about MS. MS gets a device manufacturer, which allows them to compete with Samsung and Apple. Hindsight is 20/20.
  - mark-r 13y ago
    Maybe Stephan Elop will be the successor to Steve Ballmer? I'll let you know if I see any pigs flying.
- Philadelphia 13y ago
  The NeXT deal made perfect sense. Copland, Apple's internal effort at making a next-generation OS, had failed, and they needed to acquire a pre-baked operating system. Speculation at the time had them acquiring BeOS, but they went with NeXT instead, and the rest is history.
JimmaDaRustla 13y ago
Here we go. Weeeeeeeeeeeeeeeeeeeee...
randallsquared 13y ago
Just a few days ago there was talk around here about Elop being in the short list for Microsoft CEO. Does this make that more or less likely?
geophile 13y ago
Speaking through my hat here, having read nothing about the deal. But is this the hiring of the new CEO? Sort of like Apple buying NeXT to bring back Jobs?
blahbl4hblah 13y ago
"Its a bad idea!" <----- Says random guy on the internet. Who give a fuck?
kamakazizuru 13y ago
who is this guy.. why does his overly entitles opinion on this matter?
chollida1 13y ago
> "...I think Microsoft ought to abandon Windows Phone. The war is over, and iOS and Android won." Wow, its times like this when its appropriate to trot out Michael Dell's famous apple quote. > When asked what he'd do with Apple if he were in Jobs' shoes, Dell said: >> What would I do? I'd shut it down and give the money back to the shareholders.
ChuckMcM 13y ago
It isn't clear to me why the author is angry here but it comes across that way :-) His thesis though, that something forced this move, is pretty credible. And the choices being (in order of likelyhood) 1) Nokia filing for bankruptcy - this one clocks up as being most likely for me 2) Someone else was going to buy them - I wondered about this with Apple's Maps fiasco, they had much better maps than Apple did, although I don't think Nokia would go for a breakup with partial acquisition. 3) Nokia switching to Android - this one I hear from people who wish it were true, but haven't seen much from Nokia on it. Nokia has clearly been hurting for a while. Small flashes of excellence in an otherwise confused consumer experience. They also showed that you could build a competitive experience with Microsoft's phone product but it hasn't been helped by Microsoft's inability to get the developer traction it wanted. Time will tell if it was able to change the path of Nokia and Microsoft for the better.
- protomyth 13y ago
  > 2) Someone else was going to buy them - I wondered about this with Apple's Maps fiasco, they had much better maps than Apple did, although I don't think Nokia would go for a breakup with partial acquisition. Am I reading the news wrong or is this a partial acquisition? It actually looks like Microsoft just made it easier for Apple to buy the part of Nokia it would want (maps).
  - ChuckMcM 13y ago
    I don't have inside information here, but from what I know about such things, breaking it up decreases the overall value sometimes. Sort of a "leave the desirable asset attached to the junk to ensure it all sells." In the press release Microsoft did they explicitly call out getting the Maps unit as part of the deal. It would also have been a disaster for Microsoft if Google had bought them, not that I think they were thinking about it.
tsycho 13y ago
AppleOutsider has a better-articulated article with a similar viewpoint. http://www.appleoutsider.com/2013/09/02/nokia2/ http://www.appleoutsider.com/2013/09/02/nokia2/
rgeyzer 13y ago
This guarantees that Nokia phones will continue to run Windows and that Microsoft can stay in the fight. This could be a life and death fight for Microsoft as both Google's and Apple's ecosystems are extending to phones, tablets, set-top boxes and beyond. They haven't built a bad Phone OS, but they need more time and a full-court press to fight for some market share. This deal gives them that opportunity.

204 points by monkbent 13y ago

deleted 13y ago

[deleted]

arethuza 13y ago
Sometimes I think these really big acquisitions are based on the "Politician's syllogism": 1. We must do something 2. This is something 3. Therefore, we must do this http://en.wikipedia.org/wiki/Politician%27s_syllogism http://en.wikipedia.org/wiki/Politician%27s_syllogism
- seabee 13y ago
  I wouldn't limit it to the really big acquisitions. If the market says jump, the desperate company does it ASAP and invariably bumps their head on a sharp pointy object.

devx 13y ago

I love this guy. He almost always "gets it". If Microsoft was forced into buying Nokia's phone business, then if I were a WP phone customer, I'd be even more worried for this division's future, because it means they don't really have a clue what to do with it in the future, if they only bought it so Nokia doesn't go bankrupt (they were running out of money). It also doesn't help that Microsoft has historically had pretty incompetent management, horrible culture between divisions and inside divisions, and it's now in the process of reorganizing and getting rid of its CEO (which was also sudden, and unplanned).

beloch 13y ago

The notion that Nokia was about to jump-ship or simply go under is certainly plausible. Another possibility is that MS wanted to start using Nokia's resources for their other hardware projects and it was going to be awkward slicing off teams from Nokia and having them start working under a MS department. MS might not be selling as much hardware as Apple, but their XBox line is the current king of consoles. With a new console-war brewing, MS is probably desperate for any edge they can get over Sony. Who knows? Nokia might just have something that can help.

hannibal5 13y ago
I think Microsoft sees Smartphones as strategic must have for long term. MS saw that Nokia is the only player in the Windows market and Samsung is never going to be big on MS. They just bought the hardware and are making Windows phones into closed platform like iPhone is. I don't think that Samsung and others are going to continue making windows phones after MS bought Nokia.
- tankenmate 13y ago
  The biggest reason that phones are a strategic "must have" is the massive drop in desktop sales.
  - panacea 13y ago
    No. Phones (or watches) as access points to 'your digital life', even if managed on tablets/laptops/desktops, are the digital wallet in your pocket.
- fnordfnordfnord 13y ago
  Samsung and others weren't going to continue making windows phones before MS bought Nokia, either.

redact207 13y ago

Can I add my own conspiracy theory and put forward that MS wanted to buy Nokia years ago when the world was going mobile but couldn't. Then one by one, MS VPs mysteriously left their posts to go work with Nokia. Fast forward to today, MS finally buys the firm they wanted to in the beginning.

pessimizer 13y ago
That was the consensus amongst Nokia fans after the burning platform speech - that Elop's purpose was to drive down the price of Nokia until it was a cheap acquisition.
asabjorn 13y ago
The strategy to partner with MS always seems heavily tilted in MS favor. It probably makes a good business study how this can be avoided for anyone in a similar industrial position. It always baffled me that there was no successful shareholder riot because Elops strategy seemed like a self-goal no matter how it would play out.

kennethh 13y ago

Elop must have the record in destroying a company. In 5 years a company went from being market leader with something like 90% of the smartphone market to almost bankrupt. I do not think something like this have ever happened this fast.

davegardner 13y ago
Elop only joined Nokia towards the end of 2010. Nokia was well and truly on their downward slide by then.
Steko 13y ago
(1) 50% five years ago and already dropping. http://upload.wikimedia.org/wikipedia/commons/a/ae/World-Wide-Smartphone-Market-Share.png http://upload.wikimedia.org/wikipedia/commons/a/ae/World-Wid... (2) Elop arrived in 2010 and Nokia was basically already done for.
- speeder 13y ago
  I must disagree. In 2010 Nokia was 70% of Brazil smartphone market and their share was still rising, very fast. Symbian phones were known to.be solid, fast, and had apps and games ( even a port of counter strike! ) As soon Elop announced Symbian death, the whole thing tanked, and I cannot help but feel that Elop is stupid.
  - skc 13y ago
    This would seem to imply that Brazilian consumers read the burning platform memo. I highly doubt that. I have a huge problem with people flat out claiming that Symbian was an acceptably competitive phone offering in 2010. That's a bald faced lie in my opinion.
    - speeder 13y ago
      It was, because it was what people could pay. Symbian phones were much cheaper than a iPhone, and Android had not yet really arrived in force. Nokia was known here for making sturdy, durable phones that you could use for a long time. If they paired that with also having a solid app ecosystem for the most popular brazillian uses (like, Facebook, Mail and Youtube) they could have easily won the smartphone wars here. Instead they dumped Symbian and went for Windows Phone, allowing Android to get their former place in the market. Mind you, most Android phones here are now no-name chinese ones, Nokia left the cheap but solid phone market, and cheap (but not-solid) phones took over the vacuum.

polemic 13y ago

> "...I think Microsoft ought to abandon Windows Phone. The war is over, and iOS and Android won." That's remarkably short-sighted. The first iPhone was released only 6 years ago, Android 5 years ago. You really think that Microsoft - a company with nearly infinite runway, an enormous R&D investment and serious history - is going to down tools after a few years of frustration? Not likely. The prize is too big and consumers too fickle to just give up.

Steko 13y ago
Agreed. Phones aside, the viability of Chromebooks goes a long way to showing how open the OS market is compared to the desktop market a decade or two ago.
telephonetemp 13y ago
I agree. I don't see why this isn't like saying > "...I think Microsoft ought to abandon the Xbox. The war is over, and Sony and Nintendo won." a decade or so ago.
- venomsnake 13y ago
  Except you have tabula rasa in console business every few years so you could jump anytime if you have the money. And games as entertainment products rarely have legs longer than a generation - we the PC master race are spoiled with decade long backwards compatibility but in the console world it is rarely so. And entertainment business (because the console is just a hardware dongle) is different beast.
  - freehunter 13y ago
    I would argue that any investment in the Halo series, God of War series, or Mario series is a big draw towards buying the next console the same as the console you currently have. Yeah, you'll have to buy Halo 5 on the Xbox One, but you've already played Halo 1-4. Switching to Killzone halfway through the series won't scratch the same itch.

lotsofcows 13y ago

Elop's job was to drive to the price. Microsoft wanted, and now has, the IP.

JulianMorrison 13y ago

Microsoft wanted an ecosystem of competing handset makers like Android, where they could just make the OS and rake in the money; they have realized they aren't going to get it, and the one handset maker who took the sucker bet was dying fast. So (I predict) they have decided to switch to the XBox model, where the hardware is in-house, subsidized, and used to gain market share.

lazyjones 13y ago

Microsoft is probably aiming to become a patent troll in the long run due to their lack of innovation. They already have many patents they can extort future innovators with, so picking up Nokia's (reported to be worth $6b) makes sense.

jhonkola 13y ago
They didn't buy Nokia's patents. They bought Devices & Services business unit (the one making the phones) and a 10-year (non-exclusive) licence to Nokia's patents, which obviously are needed to make the phones. Does not sound like a patent troll move on part of Microsoft.

shadowmint 13y ago

I don't agree with all the things in this article, but there certainly rings a bell of truth in there somewhere. A 5.44 billion EURO transaction to acquire a company that is already in a strategic partnership with you and working exclusively with your platform doesn't make sense. My vote also goes for Nokia being financially in trouble, and M$ have their hand forced by the fear of a collapse in Nokia would gut the distribution channels for all the flagship windows phone models. Worse, what if word got out and someone else bought them? ...wait, no, that would mean Microsoft would have some special insider knowledge of Nokia's finances that no one else was party to. Surely not.

andrewfong 13y ago
> ...wait, no, that would mean Microsoft would have some special insider knowledge of Nokia's finances that no one else was party to. Surely not. Not really an issue if the board approved going to Microsoft with the financial information first. Moreover, when negotiating the strategic partnership, Microsoft may have gotten a right of first negotiation, that would legally entitle it to first dibs on the acquisition and certain "insider knowledge" anyway. Ultimately, shareholders might still have to approve the transaction, but there's no insider trading issue with reaching out to potential acquirers on the downlow.
- yulaow 13y ago
  So, since the begin the Board was aiming to an acquisition by microsoft after nokia would be so in debt that the total cost would drop? It seems like the board, since now, has made the interest of microsoft and not nokia.
  - tanzam75 13y ago
    Nokia does not have a net debt position. They have about €2 billion of net cash. After the Microsoft acquisition, €7 billion.
maaaats 13y ago
The article is full of errors and unbacked claims. > ... adding on a mobile phone business that Microsoft probably should abandon ... Why should it be abandoned? Just because the author isn't a fan of WP8? > have argued that Stephen Elop made a massive strategic error by choosing Windows Phone over Android; ... It would have been to Nokia’s benefit to have everyone running Android, including themselves. Not necessarily true. There's only one manufacturer making money on Android at the moment, Samsung. When Elop got aboard, Nokia was already waaay behind. It's not like he drove them down, he merely tried saving them. Choosing Android might have gone better, but probably not. At least it was better going for WP than sticking to their own, dying systems.

Yuioup 13y ago

No way they weren't forced. This was planned all along. (Disclaimer: I didn't read the article. I just disagree with the headline).

objclxt 13y ago
To be honest, I doubt it was how Microsoft planned it turning out. It certainly wasn't Plan A. Microsoft had already made a significant cash injection into Nokia. Plan A would have been for the Lumia handsets to be a massive success, and for Windows Phone to gain significant traction. Although you could argue there has been some progress towards this, it hasn't been fast enough for either Microsoft or Nokia. Nokia's current strategy with Windows Phone simply isn't working. They're at a point where they either a) change the business plan, or b) find another source of cash to pay the bills. Since 'changing the business plan' in this case would have been hugely detrimental to Microsoft the acquisition was inevitable, but far from ideal for both parties.

ThomPete 13y ago

they didnt buy Nokia, they bought part of Nokia no?

tzury 13y ago

People are giving advises all over the web, as if, getting to a point where you have $7B to spend is not a result of a series of wise decisions and solid strategy. I am not a Microsoft fan to say the least, but boy, we understand that this is all your personal opinion, etc. However, have you ever touched or got near by a pile of a billion dollars, that you allow yourself to make such strong opinion about? Did you ever have 1% of that money, or .1% of that money? Everyone has the right to have an opinion, but please, assume "they" know facts and figures you don't.

JonoW 13y ago

I'm not sure why so many are predicting WPs death - it's actually doing pretty well outside the US. Here in the UK it's now just under 10%. Pundits are far too US orientated.

deerpig 13y ago
I've never seen one in SE or East Asia, not one, in Hong Kong, Singapore, KL, Bangkok or even little Phnom Penh, and you would think MS would see WP's best chance was to attract buyers who hadn't bought a smart phone before. What are they buying? Samsung mostly (and not just Galaxy, they make a lot of android phones at a cheap pricepoint), with 20-25% buying iPhones.
yulaow 13y ago
well that's because US has the market dimension of the full EU and more. This is why also if in EU wp is aroundd 10%, worlwide it is still on 3%. Us-Africa(that is still for more than 60% on dumbphones)-Cina-Japan do not like it for various reasons
bhauer 13y ago
Not only that, but with today's homogeneity in hardware, the phone market takes some time to shift. I held onto my Android phone for my two year contract and replaced it with a Lumia 920. My wife's Nexus contract is expiring in a few months and she is considering a Lumia as well. That transaction will occur about a year after my last upgrade. These things don't happen instantly now that so many devices are alike. By comparison, when we adopted the first iPhone, it was a dramatic departure from previous cell phones and we had to have it immediately. Since then, we've just waited for our contract terms to expire. Though I would interrupt my contract immediately if someone would deliver on personal application omnipresence, making a cell phone that is just a small touch-enabled view on my network and my applications.
Zigurd 13y ago
I would dispute that WP is "doing well" anywhere except a handful of countries where Nokia previously dominated distribution. Microsoft now owns all of Nokia's handset business, which is still 90%+ non-WP. As the S30, S40, and Asha base under WP evaporates, WP will have nothing to piggyback on in these markets.

jeswin 13y ago

The tragedy in the deal, as I hinted at earlier, is that I think Microsoft ought to abandon Windows Phone. According to the author, MS should abandon the fastest growing class of computing devices. What kind of a strategy is that?! Meanwhile, Windows Phone sales are up 77% YoY.

rmk2 13y ago
Growing without market-share tells us comparatively little. And to be the person for once that posts the obligatory xkcd comic: http://xkcd.com/1102/ http://xkcd.com/1102/
- jeswin 13y ago
  On HN, you could give people the benefit of doubt and assume that market-share growth wouldn't be brought up unless the numbers were large enough. I would refrain from quoting that figure if it went from say 10,000 units to 20,000. Last quarter, iPhone sales were 31 million devices and WP8 sales were 7.4 million devices. If WP8 is selling one device for every 4 iPhones, that is indeed a decent result relative to where they started off from.

anuraj 13y ago

The deal does makes sense - MS has oodles of cash and several cash cows but no stars for the future. Other two players, Apple and Google has already brought production in house - MS has a fighting chance with this acquisition - though the larger issue of MS bureaucracy can rock this boat as well

xutopia 13y ago

The deal totally makes sense from my perspective. I wouldn't be surprised if they try really hard to buy BlackBerry for cheap as well when they falter low enough to be worth it for them.

corresation 13y ago

Nokia's most recent quarterly had them sitting on $4 billion EUR of cash ($5.2 billion), with barely any burn. I don't think the company was poised to go bankrupt anytime soon. Either Microsoft is completing a long planned purchase, or Nokia threatened to dabble in Android. Other than that the purchase is irrational.

tanzam75 13y ago
That was at the end of June. In August, they spent about €2.2 billion buying out Siemens' stake in Nokia Siemens Networks. This could very well have caused some short-term cash flow issues. Which also explains Microsoft's offer to finance Nokia at extremely low interest bonds. Long-term, NSN is generating positive cash flow and ought to be able to pay for itself.

mbesto 13y ago

The Deal That Makes No Sense - Was Apple Forced Into Buying NeXT?

MaysonL 13y ago
Thing is, Apple got a great OS and a great CEO. WTF did MS get that is at all comparable?
- mbesto 13y ago
  Apple happily shuttled out what they had perceived was a bad CEO, just as we all sit here in our armchairs preaching the same thing about MS. MS gets a device manufacturer, which allows them to compete with Samsung and Apple. Hindsight is 20/20.
- mark-r 13y ago
  Maybe Stephan Elop will be the successor to Steve Ballmer? I'll let you know if I see any pigs flying.
Philadelphia 13y ago
The NeXT deal made perfect sense. Copland, Apple's internal effort at making a next-generation OS, had failed, and they needed to acquire a pre-baked operating system. Speculation at the time had them acquiring BeOS, but they went with NeXT instead, and the rest is history.

JimmaDaRustla 13y ago

Here we go. Weeeeeeeeeeeeeeeeeeeee...

randallsquared 13y ago

Just a few days ago there was talk around here about Elop being in the short list for Microsoft CEO. Does this make that more or less likely?

geophile 13y ago

Speaking through my hat here, having read nothing about the deal. But is this the hiring of the new CEO? Sort of like Apple buying NeXT to bring back Jobs?

blahbl4hblah 13y ago

"Its a bad idea!" <----- Says random guy on the internet. Who give a fuck?

kamakazizuru 13y ago

who is this guy.. why does his overly entitles opinion on this matter?

chollida1 13y ago

> "...I think Microsoft ought to abandon Windows Phone. The war is over, and iOS and Android won." Wow, its times like this when its appropriate to trot out Michael Dell's famous apple quote. > When asked what he'd do with Apple if he were in Jobs' shoes, Dell said: >> What would I do? I'd shut it down and give the money back to the shareholders.

ChuckMcM 13y ago

It isn't clear to me why the author is angry here but it comes across that way :-) His thesis though, that something forced this move, is pretty credible. And the choices being (in order of likelyhood) 1) Nokia filing for bankruptcy - this one clocks up as being most likely for me 2) Someone else was going to buy them - I wondered about this with Apple's Maps fiasco, they had much better maps than Apple did, although I don't think Nokia would go for a breakup with partial acquisition. 3) Nokia switching to Android - this one I hear from people who wish it were true, but haven't seen much from Nokia on it. Nokia has clearly been hurting for a while. Small flashes of excellence in an otherwise confused consumer experience. They also showed that you could build a competitive experience with Microsoft's phone product but it hasn't been helped by Microsoft's inability to get the developer traction it wanted. Time will tell if it was able to change the path of Nokia and Microsoft for the better.

protomyth 13y ago
> 2) Someone else was going to buy them - I wondered about this with Apple's Maps fiasco, they had much better maps than Apple did, although I don't think Nokia would go for a breakup with partial acquisition. Am I reading the news wrong or is this a partial acquisition? It actually looks like Microsoft just made it easier for Apple to buy the part of Nokia it would want (maps).
- ChuckMcM 13y ago
  I don't have inside information here, but from what I know about such things, breaking it up decreases the overall value sometimes. Sort of a "leave the desirable asset attached to the junk to ensure it all sells." In the press release Microsoft did they explicitly call out getting the Maps unit as part of the deal. It would also have been a disaster for Microsoft if Google had bought them, not that I think they were thinking about it.

tsycho 13y ago

AppleOutsider has a better-articulated article with a similar viewpoint. http://www.appleoutsider.com/2013/09/02/nokia2/ http://www.appleoutsider.com/2013/09/02/nokia2/

rgeyzer 13y ago

This guarantees that Nokia phones will continue to run Windows and that Microsoft can stay in the fight. This could be a life and death fight for Microsoft as both Google's and Apple's ecosystems are extending to phones, tablets, set-top boxes and beyond. They haven't built a bad Phone OS, but they need more time and a full-court press to fight for some market share. This deal gives them that opportunity.