Whatever your feelings about Microsoft’s Steve Ballmer, the guy deserves credit for making one hell of an exit. Just days after announcing his intention to step down as Microsoft’s CEO, he goes and sanctions what could well be the most important acquisition in the software giant’s history to date – the massive $7.17 billion takeover of Nokia’s mobile phone division, underlining the company’s determination to become a major player in the hardware department.
The deal was formally announced late last night in a flurry of press releases from both companies. Apparently, both Microsoft’s and Nokia’s boards of directors have agreed on the deal, although the transaction itself won’t be finalized until early next year.
“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services,” said Steve Ballmer, Microsoft chief executive officer.
“In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution.”
Despite the enormity of the deal, few will be surprised that its happened. Microsoft and Nokia have been bed fellows for some time, fully committed to each other even if their relationship has been fairly rocky at times. Unfortunately, things just haven’t turned out as either company had hoped. Windows Phone continues to be a spectacular embarrassment when you compare it to the dominance of Google’s Android and Apple’s iPhone, while Nokia is falling way behind in its race against the likes of Samsung.
So will the formalization of their relationship make any difference? Absolutely yes, because if nothing else the deal gives Microsoft enormous firepower to back its assault on the battlefield that is the hardware and smartphone industry. Not only does Microsoft get all of Nokia’s phones and tablets that its been developing, it also gains all of the phone maker’s patents, hundreds of talented smartphone experts and designers, and of course Stephan Elop himself – the man who many back to take over the top job from Ballmer. Elop has now stepped down as Nokia CEO and will assume a new role as executive vice president of devices and services at the company instead. He’s yet to officially join Microsoft, but with the completion of this deal many commentators are suggesting it puts him way out in front of other rumored candidates.
Many will see Microsoft’s move as a direct response to the fierce competition its facing from Apple and Google, whose dominance of the mobile industry has undoubtedly terrified both companies. Certainly this fear played a part, and the marriage will make the two companies a much more potent force – one that’s fully capable of mounting a serious challenge in the mobile space. But even more telling is that the deal represents a clear break from Microsoft’s old policy of putting its partners first .
Fact is, traditional PC vendors are not going to be very pleased – companies like HP and Dell were already unhappy with Microsoft’s designs on hardware even if its Surface tablets have so far struggled to make an impact. Microsoft has now become a clear rival to PC makers and that will have massive implications, with firms like HP now much more likely to step up their involvement with Android.
Clearly Microsoft thinks it can get away with upsetting its partners. The acquisition is a sure signal that it believes its fully capable of succeeding in the mobile space by going it alone – and while it’s sure to face many challenges along the way, Nokia’s expertise in hardware development surely means they can be overcome.