AH Tech Talk: Ballmer's Nokia Blunder Cost Microsoft Billions

I do not know what former Microsoft CEO, Steve Ballmer, was thinking when he devised this whole Nokia deal - I'm not even sure Ballmer knew what he was doing.  He was so hell-bent on beating Google and Android in the smartphone world, it seems he lost sight of good business practices and took on the fight as winning at all costs.  Those 'costs' have finally caught up to Microsoft and the new CEO, Satya Nadella, when he proclaimed a total rethinking of their phone strategy - he announced that they would be writing off $7.6 billion...almost the entire amount of the Nokia acquisition, as well as cutting up to 7,800 jobs.  Daniel Ives, an analyst at FBR Capital Markets, said, "It's a headache that Nadella inherited. It is really cleaning up Ballmer's mess."

Due to previous miscalculations, the Microsoft Windows Phone OS never really caught on in the marketplace - praised by many, it still needed much work to bring it up to the standards of Android and iOS.  Not to mention that app developers were not wasting their time or talents on an OS that never peaked over 3.2-percent of the market during the past five years according to a recent IDC report.  It is a catch-22 situation as buyers will not buy a platform without an abundance of apps and app developers refuse to write apps until sales of the platform increase.

The entire Nokia purchase was predicated on fear - fear that Nokia...the largest manufacturer of Windows Phones...might switch its allegiance to Google's Android, the most popular smartphone OS in the world.  This would really be a nail in the Windows Phone coffin and Ballmer could not let that happen.  The Nokia deal bought Microsoft another couple of years to find that successful formula that always seemed to elude them.  The 'deal' started back in 2010 when Stephen Elop - a Microsoft executive - was hired as Nokia's new CEO.  When he took over, Nokia still had over a 28-percent market share.  One of his first acts was to replace their Symbian software with, of course, Microsoft's Windows Phone software - a platform that was barely making it in a world dominated by Android and iOS.  As a result, profits and stock prices fell sharply during his tenure and by the time he negotiated a deal to sell Nokia to Microsoft, the company was very undervalued and his former company bought it for only $7.2 billion and took Elop back into their fold.  Elop has denied this 'Trojan horse' tactic, but a horse is a horse, of course.

Ballmer never really had his finger on the pulse of the wireless/mobile community.  When he spoke at a business school in Oxford after he retired, he claimed he should have focused more on the mobile phone market.  It is surprising that Microsoft kept Ballmer as long as they did, as most of their profits were from products that were developed long before he became CEO.  Microsoft missed out of their Bing search engine, allowing Google to take the top spot.  They never jumped into the social media game and when asked about Facebook's $19 billion acquisition of WhatsApp he said, "Is it a fad?  Well, probably not.  It looks more like text [messaging.]  I don't know whether they'll be successful or not.  Will that asset ever be worth anything?  Will those 450 million people ever generate enough revenue?  Reasonable people - Zuckerberg believes so, and no reason to doubt it."

While Ballmer was concentrating on upgrades to Windows for the PC, the rest of the world was looking at mobile, wireless communications and the cloud, and just like poor decisions by BlackBerry's CEOs, Microsoft was never able to recover or make a mark in the smartphone world.  They tried to do an end-of-round through Nokia and now have lost billions of dollars and many employees have lost their jobs thanks to Ballmer.

With their new Windows 10 that will work across all devices - PCs, tablet, smartphones and even the Xbox - Microsoft is hoping that may breathe some new life into their smartphone sales.  However, it seems that it is too little, too late, even though Nadella said that they will continue to expand their ecosystem of products, including mobile phones that run Windows software.  He certainly expanded the development of popular Microsoft apps that will run on Android and iOS, such as Office 365.  It maybe that sticking with software that runs across all platforms may be the niche Ballmer was looking for, but never found.

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