Nokia submits to the inevitable Microsoft juggernaut

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Risto Siilasmaa, Nokia and Steven Ballmer.

Speculation started about Microsoft’s take-over of Nokia the day former executive Stephen Elop took the CEO job at struggling phone maker. Bookmakers already considered Elop favourite to succeed Steven Ballmer as Microsoft CEO. Those odds have shortened.

On Tuesday (New Zealand time) the long-expected deal became a reality with the software giant digging into its war chest for the €5.44 billion in cash needed to buy Nokia’s devices business.

Microsoft gets Nokia’s crown jewels

For that money Microsoft gets  control of Nokia’s smartphone manufacturing. It also gets 32,000 Nokia employees. Or will assuming the deal completes as expected in the first three months of 2014.

Spin doctors pulled an extra shift to put fine sounding words in their bosses’ mouths:

We will continue to build the mobile phones you’ve come to love, while investing in the future – new phones and services that combine the best of Microsoft and the best of Nokia.

The quote is attributed to Elop and Ballmer, in an open letter published on Microsoft’s site. Let’s be honest here, the ‘you’ in that sentence does not refer to a large slice of the phone buying market.

What price the Nokia brand?

As part of the deal Microsoft gets a 10-year license to the Nokia brand. This may or may not prove valuable. Before the deal was announced most observers expected Microsoft to take the wraps of an own-brand phone some time this year.

On the other hand, the Microsoft-branded Surface tablets have not set the world on fire. They already cost the company a US$900 million write-down. Perhaps devices with the Nokia brand could do better – it certainly gives Microsoft an opportunity to start with a clean slate.

A new Nokia

Nokia minus its phone business becomes a completely different company but not completely independent from the new Microsoft. It gets to keep its Here mapping and location services – something that turns up on Nokia smartphones.

There’s NSN, a market leader in network infrastructure and selling services to telcos. Nokia also keeps a development and licensing operation. Risto Siilasmaa, currently the chairman of Nokia’s board of directors, will become CEO of the remainder of Nokia.

May you live in interesting times

The deal comes at an important time for Microsoft. With Steven Ballmer moving towards the departure gate, the company has to decide on its future direction.

Full steam ahead was never an option. There was a danger it would move further down the innovation league into comfortable old age, like say, IBM, before it. Alternatively there was the option of being more Google-like.

Instead, Microsoft has chosen the boldest and riskiest course changing direction to challenge Apple’s dominance in devices. That will be interesting, the company was wrong-footed when Apple introduced the iPhone in 2007 and again in 2010 when the iPad was launched. But now it has an opportunity to get back in the race.