The Deal That Makes No Sense - Was Microsoft Forced Into Buying Nokia?
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The Deal That Makes No Sense - Was Microsoft Forced Into Buying Nokia?
Should be the last post on this topic for a while.
Quote:
Early this morning Microsoft acquired Nokia for €3.79 billion (plus €1.65 billion for patents). It is a deal that makes no sense.
While industry observers love to pontificate about mergers and acquisitions, the reality is that most ideas are value-destoying. It is far better to form an alliance or partnership; most of the benefits, none of the costs.
A partnership similar, in fact, to the one formed just two years ago between Microsoft and Nokia.
From Microsoft’s perspective, that was a brilliant deal; Matt Drance characterized it as “Microsoft Buys Nokia for $0B,” and he wasn’t far off. The premier pre-iPhone phone maker, with what was even then one of the best supply chains, distribution networks, and brands in the world would be exclusively devoted to Windows Phone.
There is nothing further to be gained by an acquisition.
Moreover, the fact Steve Ballmer is stepping down makes a deal of this magnitude hugely problematic. Guy English has already characterized Ballmer’s disastrous reorganization as a straitjacket for the next CEO; adding on a mobile phone business that Microsoft probably should abandon is like attaching an anchor to said straitjacket and tossing the patient into the ocean. It will be that much more difficult for the next CEO to look at Windows Phone rationally.
So that brings us to the Nokia perspective. I have argued that Stephen Elop made a massive strategic error by choosing Windows Phone over Android; coming from Microsoft, he failed to appreciate that Nokia’s differentiation lay not in software, but in everything else in the value chain. It would have been to Nokia’s benefit to have everyone running Android, including themselves. Everyone would have the same OS, the same apps, may the best industrial design, distribution, and supply chain win.
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