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Bye, Nokia, nice knowing you

Steven J. Vaughan-Nichols | July 23, 2014
Nokia, once a great company and the pride of Finland, is shuffling to its grave under Microsoft's leadership.

Believe it or not, only four years ago Nokia -- poor, dying Nokia -- was the No. 1 mobile phone company in the world. Since then, it was bought by Microsoft, which last week announced that it's firing half of Nokia's workforce. So tell me, what exactly was the point of that $7.2 billion acquisition just over a year ago?

Stock market wonks may love those layoffs -- they love anything that makes the next quarter look good and don't much care about what things like that do to a company's long-term future -- but $7.2 bIllion is real money, even for Microsoft.

But that isn't all the money that Microsoft is throwing around in the great unwinding of Nokia. The company will have to spend $1.1 billion to $1.6 billion to reduce its workforce, with about half that amount going toward the Nokia layoffs. So tack another $550 million to $800 million on to the Nokia bill.

But at least Microsoft benefits from Nokia's lineup of mobile phones, right? Not so much. Microsoft last week also said it was giving up on Nokia's low-end feature phones and its Nokia X Android phones. Microsoft CEO Satya Nadella wants to focus on Windows Phone 8.x instead.

Second-guessing the CEOs of high-profile companies is great sport. Usually you can concede that the CEO might be on the right track, though you might have done things differently. In this case, however, all I can do is scratch my head. Really, Nadella? You're going to bet everything on devices that rely on a mobile operating system that's a distant third to Android and iOS -- an operating system that's actually falling further behind its rivals?

Everything I've seen makes me think that Nokia's days are numbered. Mind you, Nokia was already in trouble before Microsoft took over, but this acquisition has been a case of taking a bad situation and making it worse.

Things started to sour once a critical mass of consumers started turning away from feature phones in favor of smartphones. Nokia's Symbian was a great operating system for feature phones, but it doesn't work at all well on smartphones. Once it recognized that it needed a Symbian successor, Nokia floundered about, experimenting with several Linux-based operating systems, such as Maemo, Tizen and MeeGo, but they went nowhere. Apparently not wanting to offer me-too Android smartphones, it steered clear of that operating system (until shortly before the Microsoft deal closed, that is). Samsung, meanwhile, went all in for Android and has done very well with its Android smartphones and tablets.

As Nokia began to wobble, it hired as its CEO Stephen Elop, then the head of Microsoft's business division. At the start of his tenure, Nokia had a 34.2% share of the global smartphone market ( Three years later, as Elop engineered the sale to Microsoft, Nokia's share of the global smartphone market had declined to a lousy 3%. In the midst of that death spiral, on Sept. 4, 2012, Elop introduced Nokia's new topline Windows Phone, the Lumia 920. The next day, I wrote, "The truth about the viability of Windows Phone 8 can be seen by the simple fact that after Nokia introduced the new model its stock dived over 13%. Any questions?"


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