Microsoft blew US$7.6 billion on Nokia overcoming Apple-envy

Things were crazy towards the end of Steve Ballmer’s time as Microsoft CEO. One of his dumbest moves was buying Nokia.

Some say the decision cost him his job. That wasn’t all. Last month Microsoft wrote down US$7.6 billion it spent buying Nokia.

Until the acquisition, Google, Facebook, Amazon and, most of all, Apple dominated technology news reports and discussion.

Microsoft relevant

They still do. Yet Microsoft is relevant again. In a way the Nokia episode helped the company get back on track, in part by being the catalyst for a much-needed change of leadership. It also helped the company’s top brass focus on where the business is and where it can go.

From the sidelines Ballmer saw Apple win revenue, margin and respect while Microsoft appeared to drift towards irrelevance. Now CEO Satya Nadella has Microsoft back on the Cluetrain. 

Ballmer's last roll of the dice was an ill-judged attempt to remake Microsoft in Apple’s image. Hence the talk of “software and devices”.

In itself that was not a stupid strategy. But it ignored Microsoft’s strengths and weaknesses.

Great phones, late to market

Buying Nokia was meant to catapult Microsoft into the phone market. The phones Microsoft made using the Nokia brand were great.

In many respects the Windows Phone operating system is better than Android although many users were unhappy about the holes in the Windows Phone app store. Too many “must have” apps are either not there, woefully out-of-date or poorly supported.

Microsoft then bet on phone and tablet-like touch screens being dominant. It went too far too fast.

Instead of a steady-as-she-goes update to Windows 7 Microsoft went in boots and all with tablet-like touch screen technology for the woeful Windows 8.

Windows 7 was itself a rescue job after the horror of Windows Vista. There’s a lot of truth in the idea that every second version of Windows is a clunker.

Microsoft disrupted

Microsoft intended the move to touch screen Windows to be disruptive. In the event it disrupted Microsoft.

Buying Nokia was a disaster. Many of the 25,000 employees at the phone maker have lost their jobs. There are empty factories and ghost towns in Nokia’s native Finland.

It didn’t go any better for Microsoft. Almost every dollar it spent has gone down the gurgler.

However, Microsoft was big enough to weather that storm. A new boss, a new direction and a new confidence mean any lasting damage is now safely behind the company.

Destroying value

Microsoft should have known better. Large scale technology company mergers seldom deliver the promised gains. Most destroy value. There are as much about ego or distracting attention with big gestures as about creating fresh opportunities. Savvy investors run a mile when they hear the term synergy.

Microsoft’s Nokia acquisition is the latest in a long string of large-scale technology deals that failed to deliver on promised benefits. Think of the disastrous forced marriage between Oracle and Sun Microsystems.

This year Microsoft wrote down US$7.6 billion on theNokia deal. In effect that means the entire Nokia mobile phone business is now worthless, a decade ago the company dominated the market. Blame the iPhone.