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Microsoft’s Very Expensive Nokia Mistake

18,000 'softies hitting the bricks...

by
Stephen Green

Bio

July 18, 2014 - 9:35 am

shutterstock_140243299

Microsoft announced its biggest layoffs ever, and the underlying message is that buying Nokia was a mistake. Workers at the formerly-independent phonemaker will take the brunt of the cuts.

Google tried to buy its way into relevance as a smartphone maker by buying Motorola Mobility for $12.5 billion. They sold it off barely more than two years later for less than $3 billion. Late last year Microsoft bought Nokia’s handset division for $7.2 billion, and that has already turned out not to be worth much more than the prices of several thousand pink slips and severance packages.

These troubles are nothing unique to Google or to Microsoft — mergers & acquisitions are hard, and rarely work out as planned. And that’s if they work out at all. Ford and GM went on a buying spree of foreign automakers (SAAB, Jaguar, Aston-Martin, etc) and proceeded very quickly to drive them all into the dirt. It’s very difficult for a company to buy its way into relevancy in new markets. Ford had about as much business building Jaguars as Google did building its own smartphones.

When buyouts do work, it tends to be when a much bigger company is the buyer of a much smaller company, to gain needed technology or desired expertise, and then impose its own corporate culture on the buy-ee. Marriages usually work best as a partnership of equals; buyouts usually work best when one company completely loses its identity.

It’s an expensive lesson, but business leaders never seem to tire of learning it.

****

Cross-posted from Vodkapundit, image illustration via shutterstock / Ivan1981Roo

Stephen Green began blogging at VodkaPundit.com in early 2002, and has served as PJMedia's Denver editor since 2008. He's one of the hosts on PJTV, and one-third of PJTV's Trifecta team with Scott Ott and Bill Whittle. Steve lives with his wife and sons in the hills and woods of Monument, Colorado, where he enjoys the occasional lovely adult beverage.
All Comments   (11)
All Comments   (11)
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When Ford bought Jaguar, I'm pretty sure what they had in mind was building cars with the prestige of a Jaguar and the reliability of a Ford. Unfortunately, reality got it backwards.
10 weeks ago
10 weeks ago Link To Comment
Another source of 'merger mania' comes when a competitor buys a company to get a product or service, and their competitor feels a need to snap up a similar company. Dell, IBM and HP go through spasms of this idiocy as well.
10 weeks ago
10 weeks ago Link To Comment
Nokia had already become a dinosaur - slow to move, unwilling to change. Seems some of the people working for them had been developing new and innovative phones and programs for those phones many years ago, but the heads were unwilling to take risks and concentrated on what had been successful before.

Some of the people who used to work for Nokia have started a new company called Jolla. Whether they succeed or not remains to be seen, but at least for now that is a small company, and maybe more swift on their feet than Nokia was.

By the way, one part of Nokia still exists (it was separated from the parent company years ago, but does have the name - or maybe you could say that the original parent company was separated from the offshoot once it had grown bigger than the original division) doing what that company started out as: makers of rubber boots. Up to the early 90's that was what people here thought about when hearing that brand name, very good rubber boots. So the name will not die, only the association of the name with high tech. :D
10 weeks ago
10 weeks ago Link To Comment
I predicted both of these, for the same reasons cited.

I predict the name, "Nokia" will die shortly. MS will dump the rest of the people probably next year, and there isn't anything worth selling. It will just die. A note in the historly books, the one-time king of the cellular phone world, that sat on its laurels too long. (Like Blackberry).

Moto was also, at one time, the king of the cellular phone world, and it sat on its laurels too long.

Do we see a pattern here?

The once-mighty but now dismembered Motorola name will live on in some of its older business lines, as a radio equipment maker, and possibly as a chip maker. For a while, anyway.

10 weeks ago
10 weeks ago Link To Comment
The pattern here isn't what you think it is. The pattern is that selling an operating system is more profitable than making a piece of hardware.

Apple used to be king of the smartphone world. Now it's Samsung.
10 weeks ago
10 weeks ago Link To Comment
The pattern is companies buying other another company in a tangentially related business when they know nothing about that business.

It's done all the time. It rarely works.

10 weeks ago
10 weeks ago Link To Comment
Maybe a bootmaker will buy back and revive the original business line for Nokia - waterproof boots and other goods. They didn't get into electronics until the 60's.
10 weeks ago
10 weeks ago Link To Comment
Money just doesn't buy shrewdness or cleverness.
10 weeks ago
10 weeks ago Link To Comment
Yeah, as Yahoo is finding out with their expensive new(ish) Googlized CEO.

A lot of people have been in the right place at the right time, and been made to look good by circumstances.

It never lasts.
10 weeks ago
10 weeks ago Link To Comment
Case in point: Obama.
10 weeks ago
10 weeks ago Link To Comment
And Sheryl Sandberg
10 weeks ago
10 weeks ago Link To Comment
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