What annoys me most is not the evident maneuver that benefited Microsoft alone. It's not that Elop will be rewarded for destroying a company. It's the many Nokia employees who lost their jobs thanks to what amounts to be facilitating an acquisition by screwing shareholders and employees.
If the pre-Elop executives had been left in charge, Nokia would most likely be in bankruptcy today. The imminent collapse in smartphones was exactly the reason why he was hired.
Under Elop, the loss-making phone business was streamlined to the point that Nokia's stockholders got $7 billion for it, rather than losing the whole company.
For a comparison point, look at BlackBerry. They're basically what Nokia would have become if they had continued on the Symbian+Meego path. Nobody's going to pay 7 billion for BlackBerry at this point.
Nokia in 2010 was Titanic just before it hit the iceberg. There wasn't any way to navigate around it; the best you could do is soften the blow and manage the salvage operation.
Elop managed to bring the ship to New York but with a gaping hole in the bow and 60% of passengers dead at sea. Somebody else might have done better, who knows -- but undoubtedly there was a very real risk of losing the entire ship.
Some day someone is going to do the HBR case study on the burning platform memo.
I think you don't understand the magnitude of Stephen's actions. The day after that memo went out, I know personally that a global operator called Nokia to return over 5 Million phones the next day. Whereas a sensible management team would've released a high-level CxO memo, Elop released a company wide travesty that burned their business to the ground.
Nokia lacked leadership, but they had market share. Their new Operating Systems were better than Symbian 60 but worse than iOS and Android, so it's true they needed to change, but Windows Mobile? There's a reason only one major company fully backed windows mobile, and there's a reason Microsoft acquired them.
Your analogy would be apt if Elop hadn't been the one to steer Nokia into the Iceberg.
Look at Nokia's share price over the last 10 years. It went from $40 down to $10 even before Elop was hired. During his reign it bottomed out at a couple of bucks before going back up to about $4 until the acquisition announcement. But by the time he started the price had already fallen 75%, and there was no sign of that decline abetting. The iceberg had already hit, and its name was Apple.
Then came the the leaked memo. That was a very costly management mistake, but you don't need a MBA case study to see that, especially after Elop himself admitted it [1]. That's like a storm hitting after the iceberg, and that's the one Elop steered into while the ship was damaged and taking on water. But scrapping Symbian was a necessity, so the storm was inevitable.
However, it's folly to think there was only one reason Nokia chose Windows Phone. Things are never that simple. It's known, for example, that they were also actively in talks with Google but could not reach an agreement, leaving Google quite disappointed, as can be surmised from the snarky tweet from Gundotra. I can think of multiple reasons why they went with Microsoft:
1. Google's "Android compatibility test" meant they would be forced to use Google Maps, making their own competing investment in maps useless and a complete write-off. Seeing how they are holding on to their mapping division, it's clear they value it greatly. Worse, we see from the SkyHook lawsuit that Google captures all location data that Android phones collect to improve their maps data. So by making Android phones, Nokia would literally be helping a competitor improve their maps data. I'm guessing this was the real deal-killer.
2. MSFT was willing to provide the billions in cash infusion to keep Nokia on life support.
3. Being the flagship Windows Phone maker, they could get more leverage over Microsoft than they could get over Google.
4. They feared (some would say rightfully) Samsung's dominance in Android, especially since Samsung has vertical integration that can compete with Apple, plus a humongous marketing budget.
The real threat to Nokia started in 2007 with the introduction of the 3G. They, like Blackberry, couldn't see the iPhones brilliance, BUT Nokia had other non-smartphone divisions that were producing cash. I'd argue that pre-Elop, Nokia was on life support but stable. The burning platform memo was the iceberg and you can see the wreckage.
Consider this: Nokia is getting whomped in the Smartphone division because they keep making phones that US consumers never get. You've still got this cash cow of a feature phone business and one day you say "screw it, let's change operating systems". If you don't publish that goddamn memo, the cash flows continue and you're still roughly stable while you figure your shit out. If you publish the memo, even the feature phones stop selling.
Pre-Elop Nokia was bad. Post-Burning Platform Nokia is dead.
Scrapping Symbian was necessary, but Nokia would hardly be the first company to transition operating systems (most of them don't burn their operating systems before the new one is almost ready). No, IMHO, Elop killed Nokia with a memo. I understand but disagree with your point.
This. Even if this was not really true, his past associations and the changes to Nokia that he implemented pushed Nokia's reputation to the place it is now.
The way to navigate around it was not to announce accidentally that you were going to stop supporting the operating system that was on the vast majority of the phones that you were currently trying to convince people to buy, in favor of an operating system that you hadn't even developed a phone for yet.
Letting Symbian die the slow natural death that it deserved while introducing Winphones on the high-end/mid-market would have been the logical way to go. Elop was the iceberg.
Nokia's Symbian sales collapsed in early 2011. The real damage occurred earlier. This delay is due to inventory levels: resellers bought lots of Nokia phones in Q4 2010 but buyers didn't want them anymore, and the shit hits the fan at Nokia only in the next quarter when those resellers don't buy any more phones.
What did Elop do in Q4 2010 that would have caused the collapse in sales? The "burning platform" memo came in Feb 2011.
Which is more likely: that millions of people didn't buy Nokia phones because they somehow disliked a new CEO who hadn't yet done anything, or because they just didn't want the phones that Nokia was selling in 2010?
Nokia's 2010 phones like N97 and C5 were simply horrible. The Symbian-based new devices in the pipeline were barely any better. One Meego phone wasn't going to save the day. Elop saw that and took drastic action.
Somebody else might have tried coasting on Symbian while developing Meego into something workable -- and that would have taken Nokia down the BlackBerry route, only with much larger expenses (Symbian and Meego R&D was ridiculously expensive; without Elop's cost slashing, Nokia would probably have been losing billions per quarter in 2012).
I said that Nokia lost here AFTER Elop, not before.
When I was creating my startup (mobile game developer) in 2012, market research showed that Symbian still had 30% of new sales (and what increased was not iPhone, it was cheap android), and 2011 they still had healthy sales here.
It was not the announcement that killed Nokia here, it was the fact that no new phones showed up here anyway, people wanted to buy it, but there was nothing to buy, lots of early Android phones here used Nokia design on Purpose, and Sony Ericsson here made their initial foothold using Symbian (when they finally switched completely to Android, the interface partly copied the one it had on Symbian... I own a Xperia Play, and my mother own a 2011 Symbian Sony phone, and they are surprisingly very similar to use).
In addition to Pavlov's comment: The Chinese knockoffs are mostly eating into Nokia's lowe-end market share. They have been doing so in India and China as well, and since before Elop took over.
Here while Nokia was dominant they had no foothold, mostly because the cost-benefit of Nokia was better (ie: buy the phone for a reasonable price, and keep it for 4, 5 years... Here phone being sturdy is a very valued feature, and Nokia was notorious for that).
It seems evident that the plan all along was for Microsoft to acquire what's left of Nokia. This was probably blessed by the board of directors in strict secrecy. Of course I'm just guessing here, but the more details are surfacing the more it seems like that. Microsoft is paying 70% of the Mr. Elop's reward (source: Finnish news).
This reminds me of John Thain at Merrill. The company was headed for the toilet before he got there. He was the boss as the share price fell through the floor. He found a buyer, then asked for a large bonus. Ultimately he was rebuked, and left the combined company.
The difference here... The CEO came from the new buyer, and is getting paid off the acquirer. It certainly looks bad. But... If he was wise enough to sell the company before disaster, there is something to be said for that.
Nokia was in deep trouble when Elop showed up, and blaming him for it is silly.
As proof that this isn't merely hindsight: "In a few years, it will be easy to blame Stephen Elop and claim it is unjust for him to be paid even while Nokia tanks. But it isn't his fault that Nokia is in trouble (he's been CEO for 13 days)..."
NOK had crashed long before Elop was hired. The subsequent decline was due to the leaked memo saying they were scrapping Symbian entirely rather than the move to Windows Phone. The stock would have crashed even if they had announced a move to Android instead. Symbian was the platform on which they rose to dominance, and it was clearly not going to cut it in the new smartphone era, so scrapping it was inevitable. But hearing it from the horses mouth clearly signaled that they had no new tricks up their sleeves and were essentially starting from scratch.
Oh yeah, the memo was definitely an expensive mistake, as I said elsewhere on this thread. I was just saying the majority of the damage was done before he joined.
$15 billion whole, so I think the mobile division was worth at least 2x that, especially if we consider that when acquired, companies usually pay a premium over the market price. Motorola was like $9 billion at the market price when Google bought it for $12.5 billion.
I don't think he destroyed anything, just Nokia got caught off-guard by the iPhone and never recovered. As for choosing Windows Phone over Android, we'll never know and now it's easier to criticize but I would have done the same thing.
Sometimes it just doesn't work and companies need to reinvent or die.
Microsoft "partners" have a history of getting royally screwed. Android was the obvious choice, only a complete idiot (or in this case, a Microsoft mole) would choose otherwise.
Not every company needs to reinvent to survive, plenty of companies perform well sticking in a middle ground. As did all the phone manufacturers who used Android...
Except for Samsung, all the companies that were in the phone business before the iPhone and then went with Android are doing poorly today: HTC, Motorola, LG...
If my memories of Nokia's range of wonderfully resilient, well packaged, highly functional feature and Symbian phones are anything to go by - Nokia would have had a significant slice of the Samsung's Android market. Remember - Nokia delivered the N800 range; they could have done so much with Android.
Do you think that would have happened with Nokia? Their hardware designs and cameras alone would have made them a top tier Android vendor. Their distribution channel would have assured that.
HTC, Motorola, Sony and LG essentially make their own beds, and worth noting that pretty much all of them would have been long bankrupt (their phone business, as obviously Sony and LG are much more) sans Android.
And now Sony is seeing a resurgence because they're recognized the obvious: you can't beat Samsung in the art of putting high-quality equipment in a cheap plastic chassis - they do that incredibly well. You can't beat them in low-quality equipment either, and there's a million no-name Chinese companies that are trying anyways.
So Sony is going back to their strong suits - they used to be the company whose design language was copied by Apple. The Xperia line shows they've returned to this form.
"Their hardware designs and cameras alone would have made them a top tier Android vendor"
I believe this to be true: my niece is looking into buying a smartphone with a good camera. The "obvious" choice would be the Nokia 1020... but it's off the table because it runs Windows (she's considering the Xperia Z or the LG Optimus G)
"Please, please, Nokia, adopt Android and put your efforts into making great hardware to go with it, without ruining the interface like so many other manufacturers do."
Interestingly, the "trojan horse" hypothesis has been around for at least 2 years:
Usually disruptors start with a very low end non significant part of the market and chase competitor gradually out.
That's what they were left with after the unexpected smartphone boom.
So the chance for them to recover was there with a small shift in strategy but after they gave that up and bet everything on Microsoft they got doomed.
It was obvious that Nokia should have gone with Android because of its popularity versus Windows Phone. Elop surely guided them towards Microsoft even though it was the inferior option.
Imagine if Nokia had gone with Android two years ago. Nokia's build quality and cameras plus pure Android versus Samsung's build quality and Touchwiz would have made Nokia the obvious choice for many smartphone buyers.
You know what, I think you're right too. But I'm just an armchair M&A analyst. It's about risk reduction and this is a much safer bet than say perhaps, Kin?[0] There are so many dynamics to this, as it's not as simple as you may think. Just a few factors that often get missed:
- Cost (and time) of go to market
- Cost of marketing
- Cost (and time) of branding
- Emerging market opportunities
This list goes on and on...
Unfortunately what is produced as an offshoot of M&A is a whole bunch of people who start pulling at the windfall straws.
Not if you have the opportunity to smash one big opponent. After all Nokia was the biggest phone manufacturer worldwide and if Nokia would have chosen Android and produced high build-quality phones, it could have "easily" become the top smartphone manufacturer again, or atleast number 2.
Now Microsoft has one enemy less and gained a company that was known for it's high-quality phones for years.
Cheaper, maybe, but this way is probably a faster and less risky means to vertical integration a la Apple; buying Nokia means not having to build out mobile engineering, manufacturing, and supply infrastructure from scratch, as well as (likely) a pipeline of product designs for the next year or two.
It was more of a desperate move than a well-planned move that needed to happen. Ballmer cared more about not wanting Nokia to go Android, than about them needing Nokia's hardware division and 35,000 employees.
Doesn't Finland have laws about this?