Satya Nadella Admits He Was Against Nokia Acquisition
- Paul Thurrott
- Sep 25, 2017
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60
In his book Hit Refresh, Microsoft CEO Satya Nadella admits that he advised his predecessor not to purchase Nokia, the struggling smartphone maker. He later wrote off the entire $7.5 billion acquisition, and plotted Microsoft’s two-year exit from the smartphone market.
“The Nokia deal [was a] painful example of this loss [in mobile],” he writes in the book. “We were desperate to catch up after missing the rise of mobile technology … Nokia fell from the market-share leader in mobile to number three.”
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Nadella then documents then Nokia-CEO Stephen Elop’s decision to partner with Microsoft in 2012 on Windows phone, and their resulting success: “Double-digit market share in some European countries.” But Windows phone always remained a distant third in the market.
Microsoft purchased Nokia because it had to: Had it not, Nokia would have adopted Android and potentially abandoned Windows phone. But either way, that move would have doomed Microsoft’s mobile efforts.
Curiously, this is not how Nadella tells this story.
“The hope was that combining the engineering and design teams at Nokia with software development at Microsoft would accelerate our growth with Windows Phone and strengthen our overall devices ecosystem. The merger could be the big, dramatic move Windows needed to catch up with iOS and Android in mobile.”
At the time, Satya Nadella was on then-CEO Steve Ballmer’s senior leadership team. And Mr. Ballmer, unsure about the acquisition, asked each member of the team to vote on whether it made sense.
“I voted no,” Nadella writes. “I did not get why the world needed the third ecosystem in phones, unless we changed the rules … But it was too late to regain the ground we had lost. We were chasing our competitors’ taillights.”
Microsoft’s halfhearted strategies over the next few years, under Satya Nadella’s leadership—swamp the market with barely-differentiated low-cost phones, mostly—didn’t help. But in 2015, Mr. Nadella wrote off the Nokia acquisition, eliminated nearly 18,000 jobs, and announced Microsoft’s plans to exit the smartphone business.
“Buying a company with weak market share is always risky,” Nadella explains. “We should only be in the phone business when we have something that is really differentiated.”
That sounds like a hint at future “Surface Mobile” devices, but it’s not clear, as he notes that Continuum and Office running across all mobile platforms were how Microsoft followed up on this “key insight.”
Anyway, interesting stuff.
Conversation 60 comments
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skane2600
<blockquote><a href="#181402"><em>In reply to JohnGalt1717:</em></a></blockquote><p>Well, you covered a lot of topics so I won't address them all. Android emulation on Windows Phones would have bought very little for MS IMO. You want Android, you buy an Android phone. Why would people want the confusion of two different application platforms on their phone particularly with the risk that the Android emulation wouldn't be 100% compatible?</p><p><br></p><p>Likewise, most people serious about iOS development will do it on a Mac. It's the lowest risk option. If a "small shop" can't afford both a PC and Mac chances are they aren't principally in the software development business. But even so, making iOS development cheaper doesn't help UWP, it just makes iOS development a tiny bit more attractive.</p><p><br></p><p>The most popular tool for developing Android apps is Android Studio which runs on Linux, Mac, and Windows. So there's really no problem using a single Windows PC to develop both UWP and Android apps. I prefer VS to Android Studio or Eclipse, but I'd feel safer developing Android using the standard tool.</p>
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skane2600
<blockquote><a href="#181518"><em>In reply to PeteMiles:</em></a></blockquote><p>Most people spend far more time in bed than in their cars, that doesn't mean cars are "on their way out". While there's some overlap between activities on a smartphone and a PC (or Mac), smartphones can't fully replace PCs. It's funny but if PC sales increased while smartphones sales decreased, I bet nobody would be talking about the demise of smartphones. That's because "mobile is the future" has become the standard mantra. There's no reason why smartphones and general purpose computers can't both be viable products for many years to come.</p>
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shameermulji
<blockquote><a href="#181526"><em>In reply to skane2600:</em></a></blockquote><p>"smartphones can't fully replace PCs"</p><p><br></p><p>For the vast majority of people and their use cases, yes they do.</p>
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skane2600
<blockquote><a href="#181566"><em>In reply to shameermulji:</em></a></blockquote><p>A lot of smartphone uses cases were never a big thing on PCs and vice versa. People who never write formal documents or spreadsheets don't do it on PCs and don't do it on smartphones either. If one reads and writes emails on occasion, interacts on social sites, or consume content, a smartphone is fine if you don't mind the small screen. But if you need to accomplish tasks that have traditionally been done on PCs, it's a very poor experience.</p>
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skane2600
<blockquote><a href="#181551"><em>In reply to hrlngrv:</em></a></blockquote><p>Not really a valid example of not providing security. Like saying cars don't provide safety features unless using a seat-belt is required to start the car. </p>
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skane2600
<blockquote><a href="#181579"><em>In reply to hrlngrv:</em></a></blockquote><p>The issue was never about whether administrator is a potentially dangerous account. If one is allowed to create non-administrator accounts then security has been supported with respect to that particular issue. </p><p><br></p><p>As far as airbags are concerned, given the recent safety problems they've had, opting in might actually be a good idea.</p>
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Bats
<p>There is a lot of things in Paul Thurrot's post, that I don't understand. It's making me think that Satya Nadella isn't fit to be CEO of Microsoft or he thinks people are stupid.</p><p>So what if Nokia dropped to #3? It's only two away from the top spot! Also, what exactly was #3? Nokia phones or the OS that ran it? If Nadella was referring to the phone, then #3 is good! Isn't it? In a market where the phones were made by Apple, Samsung, Motorola, Blackberry, Sony, LG, etc….and Nokia was #3….lol….am I missing something here?</p><p>As for "Double-digit market share in some European countries." , I remember this. Paul's commentary on this always made it seem like Windows Phone was turning the corner and was ready to take off. </p><p>I don't totally agree with Paul's statement here when he said this: "Microsoft’s halfhearted strategies over the next few years, under Satya Nadella’s leadership—swamp the market with barely-differentiated low-cost phones, mostly—didn’t help." For the most part, Paul was "selling" these low cost Windows Phones pointing out that the Windows Phone OS was soooooooooooooo good, it was comparable to the higher end Lumias. As for the "differentiated" issue, did Microsoft highlight that with their phones? YES-THEY-DID. If people don't remember, Microsoft was marketing the hell out of Windows Phones, in particular, the camera. Microsoft was boasting the 41 megapixel feature on one of their phones and, if I remember correctly, the 4x zoom. No phone in the market (Samsung and Apple) had a phone, whose camera boasted that many megapixels. </p><p>Look, the reason why Windows Phone failed is this: It just wasn't a good phone or a pocket computer. Compared to Android, it hardly did anything. It's like getting used to eating steak to then suddenly be served with a burger. It was the worst $200 item, I ever spent OR…..(currently) the worst $200 dedicated Skype headset ever.</p><p>It was just a bad phone. 99.99% of the worldwide population can't be wrong.</p><p><br></p>
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skane2600
<p>“I did not get why the world needed the third ecosystem in phones.."</p><p><br></p><p>A good point except that he should have said "mobile" rather than "phones". There is no separate phone and "everything else mobile" ecosystems.</p>
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skane2600
<blockquote><a href="#181487"><em>In reply to skane2600:</em></a></blockquote><blockquote>I can only assume that those who down-voted me believe there's a separate smartphone iOS and tablet iOS and/or a separate Android for smartphones and an Android for tablets. Although the results aren't always optimal I'm pretty sure that the first and second ecosystems are mobile, not just smartphone.</blockquote>
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shameermulji
<blockquote><a href="#181525"><em>In reply to ponsaelius:</em></a></blockquote><p><br></p><p>A bit simplistic. MS still has their Xbox division which is entirely consumer-focused. Just to expand from there, gaming is one area where MS is heavily invested in, that includes not just Xbox but the PC as well (ie: VR).</p>
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skane2600
<blockquote><a href="#183666"><em>In reply to edwan:</em></a></blockquote><p>In the last 50 years how many sucessful new car companies have been started in the US? Even Tesla's fate hasn't been determined yet. MS could have certainly created a "me too" Android phone, but it would have been difficult to compete against the more established players.</p>
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dontbe evil
<p>no surprise, ASAP he became CEO, he got his revenge … hope for a new MS CEO ASAP</p>