Feeds

Microsoft 'mulled Nokia buyout, ran away screaming'

Why Windows 8 giant will wait for Finns to bleed some more

Internet Security Threat Report 2014

Analysis Rumours of a Microsoft buyout of fallen phone champ Nokia have re-emerged, prompted by nothing more, it seems, than Nokia's sickly share price.

Nokia shares recently hit a 15-year low, dropping 40 per cent in the past three months alone*. But well-placed sources tell us that Microsoft was given access to Nokia's books late last year in an attempt to evaluate which parts, if any, were worth acquiring.

Not many people know this. The story is that having had a gander, Microsoft walked away.

Then in January came the rumour, sparked by blogger Eldar Murtazin, that Microsoft would snap up Nokia's smartphone division and brand while the low-margin volume feature phones would be flogged off to private equity or a Chinese buyer. This wasn't just premature, it was fictional - but the rumour gained legs because, it sounded probable: should there be a sale, Microsoft would be a likely buyer, and a buyer for the smartphone wouldn't want the volume feature phone business.

The reason for Microsoft not already owning Nokia is twofold: Nokia didn't want to sell, and Microsoft didn't want to buy. Both are entirely rational positions to hold. Nokia still has time and cash with which to mount a fightback. Microsoft has time to generate an "ecosystem", the clunky technology buzzword for what the rest of the world calls "markets".

Let's wind forward 18 months and imagine that Nokia has made some impact, but is still bobbing along with RIM as an also-ran. The shareholders thank Elop for his important work for stablising Nokia (the demand for Symbian in the past 12 months speaks for itself) and look to maximise return for shareholders from the remaining assets.

Microsoft would almost certainly appear at that point: the IP portfolio is the obvious asset, and the brand and engineering know-how, given almost three years working closely as Microsoft's flagship OEM, is also incredibly valuable. Should Microsoft wish to acquire a crack Windows Phone engineering team, it'll be cheaper in 18 months time when Nokia runs out of cash, than it is today. It suited both parties to remain independent partners.

The only reason Microsoft would have paid a premium for Nokia last year was to keep it out of the hands of a rival. But it's hard to see which buyer would have valued Nokia as highly as Microsoft does, and would have paid a premium.

How far will Redmond go to win the tablet war?

Microsoft's determination to create a popular mobile platform for phones and tablets is in no doubt, we can see it in the Charge of the Metro Brigade (as we call it). This is the apparently suicidal insistence on melding Metro into Windows 8, even at the cost of skipping an enterprise Windows upgrade cycle: Redmond is prepared to forego billions in revenue to establish Metro as a platform.

For years, Microsoft sustained huge losses on its Xbox adventure, before finally turning a profit. But it regarded Xbox as a generous financier - leaving the division to make its own way. Xbox decisions didn't have to enmesh with some grand Windows strategy, the usual Redmond way, crippling both. Establishing Metro in the marketplace might be much more costly and take as long. At least it knows where it's going: the roadmap to WP8 and Apollo is very clear.

Yet the logic remains: it's cheaper for Microsoft to wait until this valuable asset becomes cheaper.

Such acquisition rumours must be infuriating for Nokia, which is still in its first cycle of products based on Windows. The Lumias are all essentially the same in different packaging.

Nokia's comeback can't be fairly judged until we're into the second cycle of products later this year based on Tango - and perhaps even the third, based on Apollo. Elop has already halved the time it takes for Nokia to make a smartphone, simply by shifting to Windows.

The nightmare scenario for Nokia is that the one I described here back in January: that there really isn't room, in reality, for a "third ecosystem". In this scenario there's Apple and Android, leaving RIM and Nokia fighting for crumbs. Today, the health of WP as an "ecosystem" isn't obvious: Samsung, Dell, LG and HTC all seem to have given up. Only Nokia makes a noise.

If this carries on, it makes sense for Nokia to be an independent division of Microsoft - like Xbox is today. What do you think? ®

Bootnote

* On Friday, Nokia shares jumped 6 per cent as rumours of a Samsung buyout did the rounds, which analysts described to Reuters as an attack of "Friday madness".

Top 5 reasons to deploy VMware with Tegile

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
Facebook, Apple: LADIES! Why not FREEZE your EGGS? It's on the company!
No biological clockwatching when you work in Silicon Valley
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
In the next four weeks, 100 people will decide the future of the web
While America tucks into Thanksgiving turkey, the world will be taking over the net
Microsoft EU warns: If you have ties to the US, Feds can get your data
European corps can't afford to get complacent while American Big Biz battles Uncle Sam
prev story

Whitepapers

Cloud and hybrid-cloud data protection for VMware
Learn how quick and easy it is to configure backups and perform restores for VMware environments.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Three 1TB solid state scorchers up for grabs
Big SSDs can be expensive but think big and think free because you could be the lucky winner of one of three 1TB Samsung SSD 840 EVO drives that we’re giving away worth over £300 apiece.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.