Feeds

Microsoft, Nokia and the sound of colliding garbage trucks

$7.1bn... quite a hefty price tag for joined-up marketing

Internet Security Threat Report 2014

Opinion History, it is said, doesn't repeat itself – there are merely echoes through time. Listening to Microsoft's $7.1bn purchase of Nokia's phone and services, you'd have certainly heard an echo – the distant grinding noise of two colliding garbage trucks reverberating down the years.

The phrase "the sound of two garbage trucks colliding" was coined by Sun Microsystems' co-founder and chief executive Scott McNealy to describe the merger of rivals Hewlett-Packard and Compaq.

McNealy used it to describe the unseemly act of two elderly corporate tech giants with outdated practices and ageing products attempting a merger.

Cruelly, the phrase was turned back on McNealy when his struggling Sun chucked $4.1bn at StorageTek, a giant marooned on a tape storage island as the world went digital.

With Microsoft and Nokia, we again hear the sound of rending metal. Nokia and Microsoft are huge operations – with roughly 32,000 and 100,000 staffers respectively. And neither is particularly new or adept at changing their business practices and structures.

Nokia is cast as StorageTek in this latest merger. Once the world's largest maker of handsets, Nokia's lost market share and money as the world moved on. Microsoft is like Sun: tied to a once thriving business - PCs - that market is getting left behind as the world moves on, adopting tablets and smartphones instead. It has a pile of cash at hand to buy its way into a new chapter.

But lo! The sound of dump trucks reverberates across the horizon.

Yet Nokia is no silver bullet for Microsoft on phones and tablets. Rather, it's a big, formless lump of metal.

Lost in the big-picture headlines of Tuesday was this financial gem: Microsoft is extending Nokia a $1.97bn (€1.5bn) line in prime financing delivered in three blocks that Nokia will repay, if (or when) the deal closes as expected in the first quarter of 2014. In other words, Microsoft is offering to help keep Nokia's operations funded for the remainder of 2013, a fact that raises questions about whether alarm bells were ringing inside Nokia and Microsoft over the former's fiscal health.

Nokia's turnaround - and Microsoft's plans for it

Nokia is lagging behind on chief executive Stephen Elop's Windows Phone turnaround plan: in its most recent quarter, Nokia lost $150m, as phone and device sales were down – substantially. The company had €4.07bn ($5.34bn) in cash and other liquid assets that it could draw upon - but this was down, too, from €4.36bn ($5.73bn) in January.

Nokia, meanwhile, was often reported to be open to shipping a phone running Android – the market's current number one mobile OS. A distracted or weakened Nokia would have been a disaster for Microsoft, given that Nokia makes more than 80 per cent of Windows Phones sold.

Reports today say the deal with Microsoft was agreed quickly during the summer. Incoming Microsoft board member ValueAct was not apprised of the deal, meaning Nokia isn't a VC-authored mobile turn-around.

On a conference call on Tuesday with Wall Street, Microsoft chief executive Steve Ballmer made it clear that he expects Nokia will continue to remain the sole Microsoft Windows Phone supplier for a very long time, based on today's market-share numbers.

"I don't foresee that changing dramatically in the short run. But if the market grows, I expect to see additional percentages, if you will, go to our OEMs, but it's premature to predict today," Ballmer said.

So was this a rescue deal? The rationale for Microsoft taking ownership of Nokia makes little sense based on Steve Ballmer's own justifications for Wall Street on Tuesday.

Asked what Microsoft would change that wasn't possible before owning Nokia, Ballmer said: "Number one, we talked about one brand and a unified voice to the market."

Providing a secure and efficient Helpdesk

More from The Register

next story
Scrapping the Human Rights Act: What about privacy and freedom of expression?
Justice minister's attack to destroy ability to challenge state
WHY did Sunday Mirror stoop to slurping selfies for smut sting?
Tabloid splashes, MP resigns - but there's a BIG copyright issue here
DVLA website GOES TITSUP on day paper car tax discs retire
Welcome to GOV.UK - digital by de ... FAULT
Hey Brit taxpayers. You just spent £4m on Central London ‘innovation playground’
Catapult me a Mojito, I feel an Digital Innovation coming on
EU probes Google’s Android omerta again: Talk now, or else
Spill those Android secrets, or we’ll fine you
Google hits back at 'Dear Rupert' over search dominance claims
Choc Factory sniffs: 'We're not pirate-lovers - also, you publish The Sun'
EU to accuse Ireland of giving Apple an overly peachy tax deal – report
Probe expected to say single-digit rate was unlawful
Inequality increasing? BOLLOCKS! You heard me: 'Screw the 1%'
There's morality and then there's economics ...
While you queued for an iPhone 6, Apple's Cook sold shares worth $35m
Right before the stock took a 3.8% dive amid bent and broken mobe drama
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual 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.