By now, perhaps you’ve heard: Microsoft just bought Nokia’s cellphone division for $7.2 billion.
When I mentioned the news last night on Twitter (I’m @pogue), my followers were hilariously unimpressed:
It’s all snarky but true. What on earth was Steve Ballmer, the departing Microsoft chief, thinking? What is the point of this deal?
Let’s go right to the source: “With ongoing share growth and the synergies across marketing, branding and advertising, we expect this acquisition to be accretive to our adjusted earnings per share starting in FY15,” Mr. Ballmer said in the news release. (Or, rather, didn’t say. Nobody talks like that.)
But so far, he hasn’t exactly specified how owning Nokia’s cellphone business will make Microsoft-Nokia phones any more attractive to consumers than they are now.
After all, Microsoft and Nokia have already been working closely together for the last few years. Both companies are already doing their absolute best to produce superb phones — and mostly succeeding — but consumers still aren’t buying them. Nokia’s Windows Phone phones have about a 3.5 percent market share in the United States; it’s slightly higher in Europe.
Meanwhile, there’s a serious risk to this purchase: disgruntling the other cellphone companies that make Windows phones. Samsung and HTC can’t be thrilled that the maker of Windows Phone software will now manufacture its own cellphones. Can Microsoft, with a straight face, really claim that its own phone engineers don’t have easier access to Microsoft’s software engineers? That they won’t know stuff sooner than Samsung and HTC will? That Microsoft won’t consciously or unconsciously promote its own brand over Samsung and HTC?
It will get very, very messy, and the whole thing is probably doomed.
Years ago, Palm, the maker of the PalmPilot organizers, faced exactly the same problem. Palm wanted to license the Palm software to other hardware makers, while simultaneously selling its own Palm-branded organizers. The only way to solve the conflict was to split the company in two — one for licensing, one for Palm-branded hardware. Which was a disaster. So then the company merged back together again. Which was also a disaster.
All of that chaos exacted a terrible price in expenses, talent and morale. The complications blossomed, the company was sold off, and today, Palm no longer exists.
As this article points out, Google bought Motorola’s phone company a few months back, too, but didn’t absorb it; indeed, Google avoided the disgruntled-Android-partner problem by explicitly keeping Motorola a separate entity with a “firewall” to prevent it from getting inside access to Android information. Microsoft is doing nothing similar.
Microsoft’s DNA was formed around Windows. And with Windows, Microsoft succeeded by introducing something quick and sloppy — and then refining, refining, refining until it achieved world domination.
But Microsoft just doesn’t seem to understand that the hardware world doesn’t work that way. Things move too fast. By the time you’ve refined, refined, refined, you’re a bit player struggling
for market scraps. You’d think the company would have learned that from the expensive lessons of the disastrous Zune music player, the disastrous Windows Kin phones and the disastrous Surface tablets.
Could it really be that Microsoft thinks that the touch-screen phone story will play out any differently?
No way. If you were only at 3 percent before, despite putting your best and brightest engineers together with Nokia’s, then paying $7 billion for Nokia won’t change anything. This is a goofball purchase that will have absolutely zero impact on Windows Phone’s fortunes in the world — except perhaps to sink them entirely.
Nobody knows who will replace Mr. Ballmer as the chief executive of Microsoft. But this much we do know: That poor soul will inherit quite a mess.