Does its Nokia buy thwart or fuel a possible Microsoft break-up?

Does its Nokia buy thwart or fuel a possible Microsoft break-up?

Summary: Does Microsoft's $7.2 billion purchase of Nokia's handset business make the idea of splitting Microsoft into separate devices and services organizations any easier or smarter?

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In one fell swoop, on September 3, Microsoft bought Nokia's handset business for $7.2 billion, announced plans to bring its CEO Stephen Elop back inside the company, and added 32,000 more employees to Microsoft's ranks.

I guess those "advanced" talks to buy Nokia, which reportedly broke down in June of this year, resumed some time recently.

Speaking of time, timing, actually, is rather key to the Microsoft Nokia announcement. Just look what's happened in the past few weeks:

July 11: Microsoft announces a sweeping internal reorg, creating four new engineering units, a centralized marketing operation and a structure its management believes is more suited to supporting Microsoft's new devices and services charter.

August 23: Microsoft announces CEO Steve Ballmer will be retiring some time in the next 12 months. Ballmer and the board maintain that Microsoft will continue with its recent reorg plan and develop both consumer devices and consumer and business-focused software and services.

August 30: Microsoft clears the way for investment fund ValueAct to join its board. ValueAct officials have hinted they think Microsoft's real value is in software and services, and maybe not so much in devices.

September 3: Microsoft buys Nokia's handset unit; both the Lumia smart-phone and tablet and Asha feature-phone brands; and Nokia's CEO Elop -- who for about two years, ran the Office division at Microsoft. Elop is going to head up an "expanded devices team" at Microsoft. Julie Larson-Green, the recently minted Executive Vice President of Devices & Studios, is going to report to Elop once this holiday season's Xbox One and Surface 2 launches are over.

What's next? Some think it should be a break-up of Microsoft into at least two separate companies.

This isn't something current Microsoft management has said it favors. Microsoft's execs and its board have maintained that Microsoft should not divest itself of any of its current businesses. The "One Microsoft" idea means a company that is a player in everything from entertainment consoles and phones, to Hadoop and ERP software.

Ballmer and the board have claimed and continue to claim that Microsoft needs to be in both the consumer and enterprise markets because of the bring your own device/consumerization of IT trends. The official stance is growth in enterprise is untenable without a strong consumer/device presence.

Some company watchers -- possibly the ValueAct crew, among others -- haven't bought into this idea. ValueAct officials haven't said explicitly that they think Microsoft should exit the devices and consumer markets, but the implication is definitely there. And there have been repeated calls by Wall Street for Microsoft to either sell off or at least split off some of its businesses like Xbox and Bing.

Adding Nokia to the Microsoft mix could make it a lot more difficult to justify carving up Microsoft along devices and services/software -- or consumer/enterprise -- lines. Are smartphones consumer or enterprise? What about Lumia phablets or tablets

But in another way, maybe the Nokia buy makes it easier to envision cleaving Microsoft along devices and services lines. Maybe Elop -- who seemingly is now a confirmed internal candidate for the Microsoft CEO job -- ends up as CEO of Microsoft Devices. (And Executive Vice President Satya Nadella or Executive Vice President Terry Myerson ends up as CEO of Microsoft Services?)

What do you think, fellow and sister armchair quarterbacks? What's the next move for the 'Soft?

Global coverage: Nokia Interim CEO: Microsoft deal makes us stronger | Even with Nokia devices, Microsoft wants to license Windows Phone to other makers | Does its Nokia buy thwart or fuel a possible Microsoft break-up? | Microsoft shows how to flush decades of Nokia goodwill away | Microsoft gets less than $10 per Windows Phone unit | Microsoft-Nokia deal: Reaction from the Twitter trenches | Elop drops Nokia CEO role to lead devices team under Microsoft deal | Microsoft-Nokia deal: 11 quick facts | Microsoft to buy Nokia's devices, services unit for $7.2B

Topics: The Microsoft-Nokia Deal, Microsoft, Nokia, Smartphones, Tablets, Windows Phone

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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59 comments
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  • Sad day for Nokia

    I like Windows phone a lot and have two Nokia Win phones in our family that we use. While I always knew it could happen I am genuinely disheartened to read of Microsoft's purchase of them. The qulaity of quantity of software Nokia developed for their Windows phones would never happen under Microsoft.

    As a consumer company I have no confidence in Microsoft after years of lost opportunities for the company and their constantly dropping the ball. Microsoft didn't need to buy Nokia, they needed to buy a share of them to keep them afloat and be lead by them on how to innovate and develop software for the consumer market.

    Perhaps my feelings will change as we see what happens with this acquisition, but my first gut response is that these two Nokia handsets will be the last I own. Time now to look at Android and even iPhone. Very sad day for Nokia.
    drdan
    • Right after IBM splits

      Is when Microsoft should split. Ok, it ain't gonna happen.
      greywolf7
      • Where have you been the last 20 years ?

        IBM carved out it's PC business to Lenovo.
        Alan Smithie
        • It's more like they "unloaded" the PC business to Lenovo.

          IBM wasn't too interested in devoting any kind of time and effort and research, to make the PC division profitable. Besides, they had bigger fish to fry with the enterprise sector, and weren't too interested in competing in a crowded PC market.
          adornoe@...
    • I call BS!

      No way do you call yourself a Nokia fan AND a Windows Phone fan and not see this as anything but excellent news.

      In fact, this is probably the push Microsoft needs to get Windows Phone going, because in many ways they have been dropping the ball. The only improvements this year were geared at making Lumias work better, so it's obviously Nokia driving the innovation and improvement now.

      Giving Nokia full control of the platform and given their carrier relationships might actually give WP the fighting chance they need.
      GoodThings2Life
      • Problem with Nokia was

        They didn't have any money. Competing with companies like Apple, Samsung, HTC etc. means you've gotta have mondo amounts of R&D cash and Nokia now has that with Microsoft owning them. Maybe we'll finally see a 1080p Nokia phone.
        omnimoeish
    • Actually, the Bing Apps for WP8 are the best apps in the marketplace

      One thing Microsoft knows how to do is write software - it doesn't always have time to finish it off properly (look at some of the bundled Windows 8 Metro apps), but, when it does, it does it well.
      Flydog57
      • Nope

        Not quite true, Microsoft is in this situation because of how bad Windows Mobile was - iOS and Android were like fresh air compared to WinMo and this is all down to Microsoft writing terrible software.
        fourthletter
        • It's important to understand WinMo in context

          WinMo was state of the art compared to everything that was out there pre-iPhone. What killed them was the near-impossibility of trying to modernize the OS while maintaining backward compatibility with old WinMo apps.

          Once they threw legacy apps overboard, they delivered a solid (though belated) system.

          (Also remember: this was effectively the same problem that nearly put Apple out of business in the 90s.)
          wanorris
          • Yes, but...

            Backwards compatibility is what built Windows, if Windows 8 would lose the desktop, it won't ever sell ¿don't believe me? check out Windows R.T. it's only streght is EXTREMELY DEPENDENT on the success of the full Windows 8 as a platform, we might see and use Windows 8 applications now, but not having the desktop would be a crippled useless system, untill the marketplace (Windows Store) would really get filled, the problem with R.T. is that it came too early.

            Windows Mobile 6.5 to Windows Phone 7 was different, Windows Phone 7 IS backwards compatible with (the uuhhh, yukkkkkkkkkkhhhhh, eww, crappy-)-Zune, KIN ONE, KIN TWO and Microsoft's other software, just not it's main operating system, although people often think that Windows Mobile, Pocket P.C. and Windows CE are the same, in that case Windows Phone 7 would be considered a ''true successor'' as it is built on Windows C.E., Microsoft's mobile operating system have always been Windows C.E. (although Windows Phone 8 is based on Windows N.T.), Windows C.E. started in 1992 and is still used in a lot of systems, my H.T.C. runs Windows Phone 7.8 and I have another H.T.C. (Verizon-branded fake Motorola Droid/Foid X) with Windows Mobile 6.5, although the applications from one phone won't run on the other, under the hood they're both Windows Embedded C.E. and they both run the same Microsoft applications (even Zune is a spin-off from Windows Media Player Mobile as it was first built on Windows Media Player 10 (the last version on Windows Mobile,),), pretty much in any way excluding the application marketplaces are Windows Phone 7.x and Windows Phone 6.x the same operating system, just the graphical user interface was altered.

            Windows Mobile was often forked, this is something you can't do with Windows Phone, and Windows Phone is considered the same product line by Microsoft.
            Taizong Yuan
          • WinMo

            Wow, that is some old software. I first saw it running as pocket PC 2002 and the concept of the app store was astonishing. The app store I remember most was Handango. When apple "forced" users to use their own app store I was appalled but no one seemed to mind. In fact, the opposite was true, users embraced it and the rest is history
            frankwick
    • Great move for Nokia and also great for Microsoft

      Nokia industry leading device design and engineering teams which have consistently produced the best devices on the market the last two years mow have the huge backing of and tighter integration with Microsoft. This will only help them continue to produce industry leading devices faster. Unlike the Google Moto deal where Google only wanted the patents and treated (and still does) Moto employees like pieces of crap stuck to their shoe, Microsoft actually wants to push Nokias devices teams to even higher heights. Well played MS.
      Johnny Vegas
    • Would you prefer?

      Would you prefer if Huawei or Lenovo had bought Nokia?
      wmac1
    • Why would you say that when they have some of the higher quality devices

      in the industry?

      The Zune was a solid device, much better build then Creative Zen and others? it was on par with the iPod.

      Their Xbox line is also a solid gaming device, no worse then that of Sony or Nintendo.

      I would buy their peripheral hardware over that of companies like Logitech and the like.

      The surface is a very fine piece of hardware, as good or better then competing products from established OEM's

      So to think that Microsoft would change the quality of Nokia phones is not in line with their past hardware endeavors.
      John Zern
    • LOL!

      LOL! Sure you are a Windows Phone fan and a Nokia fan - I believe you. LOL!
      petin_y@...
  • It's very simple.

    If Microsoft doesn't get an outsider to be CEO --AND-- split the company in at least 2 parts (business & consumer at least), it'll be the next IBM (its greatest fear!) in less than a decade. Guaranteed.

    Ten years from now most consumers will be using Android as their mobile AND desktop OS and Windows will be something like Cobol, used at places where old compatibility is needed.

    And I bet even 10 years from now, Windows XP will still be on 5%-10% of computers worldwide.

    The most MS can hope for is to get a good CEO, split the company and still be relevant for the next 10 or so years. If it doesn't do AT LEAST that, Sayonara. Another Windows 8 and XBox One reveal disaster will also kill their brand recognition in the consumer space for good too.
    ScottCarmichael
    • Right, everyone on android

      Call me when that happens, but I am making a public bet it will Never ever happen. Android is useless on the desktop.

      According to Microsoft's financial performance, they are still very relevant and continue to be so in the near future. becoming the next IBM isn't as bad as you make it out to be. I believe that company continues to make a shitload of money.
      sjaak327
      • I agree the current Android is pretty useless for a desktop.

        But it CAN be augmented with a reasonable desktop fairly simply.
        jessepollard
        • Yes it could

          the question however would be if this would lead to massive adoption, given the fact that it offers even less backwards compatibility and has less useful desktop applications than either Linux or OSX, which both have failed to gain broad acceptance.

          The notion that within 10 years, Windows would be relegated to something like cobal is not based on any reality. It is not going to happen.
          sjaak327
        • Which desktop for android

          This dysfunctional community could never decide on a standard thus leaving it the same fragmented mess as Linux. They will NEVER get it.
          greywolf7