Microsoft: The hardware company

It's official. With the purchase of Nokia's device division, Microsoft is now a serious hardware company.
Written by Steven Vaughan-Nichols, Senior Contributing Editor

For decades, Microsoft was a software company. Now, with the purchase of Nokia's phone division, Microsoft has officially shifted to being a serious hardware company as well.

Elop and Ballmer

We've seen this coming for a while. Heck, most people in America already thought that Nokia was a Microsoft company.

After all, Nokia was headed by a former Microsoft executive, Stephen Elop. Under Elop's guidance Nokia became the number one Windows Phone vendor. There are other Windows Phone vendors, but none were as tied to Microsoft's hip as Nokia was.

I think this move has been in the works for some time. Even as Nokia continued its rapid declineits stock lost 85 percent of its value under Elop's rule — Elop stayed true to his Microsoft alliance. In fact, as part of this deal, Elop returned to Microsoft, and some people see Elop as the CEO heir apparent to Steve Ballmer.

Don't ask me how someone who could run a company into the ground the way Elop did can even be retained in any position of authority, never mind being considered as a CEO of a major company, but there it is.

It's been suggested that Microsoft bought Nokia because it had to before the company went under. Indeed, some even think that Nokia forced Microsoft's hand by blackmailing it with the threat that the company would no longer make Windows Phones.

I don't buy these ideas. If you looked carefully, you could see Microsoft moving into hardware as early as 2011. I see the Nokia acquisition as the next natural step in Microsoft's progression from software to hardware and cloud services company.

Of course, Microsoft has been dabbling with hardware for years with some success, in peripherals such as keyboards and mice; and some failures, such as the Kin and the Zune. What's happening now is different.

First with the Surface tablets and now with the Nokia deal, Microsoft has made it clear that it wants to be your hardware provider as well as your number one software source. Can a Microsoft-branded PC or notebook be that far away? I wouldn't bet against it.

The real question isn't whether Microsoft will invest in hardware sales — the question is how much. There's no doubt that it's betting its future on hardware business.

The immediate question: How is this move is going to affect its bottom line and its business partners? As for the first, neither the Surface line nor Nokia's Windows Phone have done well in the marketplace. Microsoft has a long way to go in both tablets and smartphones before it can really contend against Apple and Google's Android allies.

As for its partnerships, I think Microsoft is continuing to burn its bridges with its hardware partners. I think this is a very dangerous course of action.

That said, it may also have been Microsoft's only chance to compete in the post-PC world.

While Microsoft still owns the desktop, it has little significant presence in tablets and smartphones, and its partners weren't helping it any. I can see Microsoft's brain trust deciding back in 2011 that its one real hope to remain a presence in personal computing into the 2020s was to take its hardware fate into its own hands.

Related stories:

Editorial standards