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Microsoft's Purchase Of Nokia Was Defensive

The news that Microsoft is going to write-off its purchase of Nokia and make even more staff redundant has sealed the popular view that Steve Ballmer didn't know what he was doing.

I suspect the truth is rather different.
When Nokia announced that it was abandoning Symbian and switching to Windows Phone it changed the mobile market forever. Giving Nokia most-favoured status had the effect of decimating sales of other Windows Phone OEMs. This made sense for both companies so long as the partnership were able to drive growth from the platform.
Nokia accounted for greater than 95% of the Windows Phone market, however the decision to abandon Symbian for the Windows platform hadn't produced and upswell in sales, and there was a rising faction within Nokia that wanted to switch tracks to Android. There is no doubt that the Android X phones were the thin end of the wedge as far as both Microsoft and Nokia were concerned.

For Nokia it was an opportunity to have a greater say in the creative and design process, an opportunity to make an Android phone that was also a Nokia phone. It was surely on the point of abandoning its Windows Phone experiment and cutting Microsoft adrift.

For Microsoft this would have meant the death of its ambitions in the mobile space. If Nokia, with its immense experience and customer loyalty; backed with all the advantages that a key Microsoft partnership conferred, could not make a success of Windows Phone, which other OEM would have taken up the baton? Short of putting in place a whole design and manufacture ecosystem, backed by Microsoft's less than stellar reputation, and building relationships with customers and networks alike, Windows Phone would have died.

Its within the context of the complete destruction of its mobile platform that Microsoft acted. The purchase of Nokia had to be completed, probably at any cost.

This weeks announcement that Microsoft has written off the full value of Nokia and has decided on a new direction for the handset business makes sense in this context. It does not want to be the sole supplier of Windows phones, so building for specific niches makes sense. In much the same way that the Surface and Surface Pro deliver leading Windows desktop experiences for consumer and enterprise, so Lumia handsets will de-mark the Windows phone range.
Its not the greatest strategy for the former Nokia division (evidenced by the way that it will bear the brunt of the next round of redundancies) however in the scheme of Microsoft's defence of its mobile platform it makes complete sense.
Now Microsoft needs to deliver three phones that will raise the standard for Windows 10 Mobile, the promised flagship, business and consumer phones.
And unlike the Surface range it will not have the grace of three attempts to get it right.