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Nokia & Microsoft: A New Chapter

Microsoft purchased Nokia's mobile phone business for 5.5 billion euros (US $7.2 billion), ending a chapter of uncertainty and expectation in Nokia's 148 years of uninterrupted trajectory of innovation, reinvention, and change.

Strong supply chain history
A quick look through Nokia's history since 1865 shows 148 years of innovation and change. As the company closes old doors and opens new ones, its supply chain is forced to change with it. With such history, we can tell that no matter what direction Nokia takes its supply chain will continue to serve the organization as it evolves.

Nokia has always demanded high standards in its supply chain. This has earned it its place as one of companies with the best supply chains in the world. Some see Nokia's sale to Microsoft as the possibility of a new beginning for a company that once led the world in mobile phone innovation, high-quality hardware, and green initiatives.

Consolidation may be the key
The sale of Nokia is expected to trigger a device/supply chain consolidation, as well as a hardware and software consolidation. This could instantly mean a new battle for Apple having a competitor in equal conditions of hardware and software under the same umbrella.

Samsung, Google, BlackBerry, and others may want to start paying more attention. Nokia Solutions and Networks will remain in Finland, as well as R&D, with better focus, and possibilities of growth.

Employment
Of course, the question of jobs is one that worries everyone. Steve Ballman, CEO of Microsoft, was in Espoo, Finland yesterday to reassure the industry that the 32,000 Nokia workers would be transferred to Microsoft. The company plans to open a datacenter in Oulu, in Northern Finland.

The project will bring some employment opportunities. However, we also know that some of those transfers will choose to just leave Nokia to join the startup world. Past experience indicates that the availability of talent may bring new technology companies to the scene.

Nokia changes again
Those of you who have followed my thoughts about Nokia, its ups and downs, and the partnership with Microsoft since 2011 know on some occasions that I, too, have become a little emotional (admittedly not a good practice in business).

Today, Aki Antman, CEO at Sulava, told me something that made me stop in the middle of writing this piece to think and reflect some more. “Here in Finland too many people think Nokia is a national treasure, or a state-owned company, to which market rules don't apply,” he said.

I see his point. At the same time, I cannot be completely at ease as I consider the company's history and Stephen Elop, Nokia CEO. Officially, Elop has been named executive vice president of devices and services at Nokia, but many believe that he is the heir apparent as CEO of Microsoft upon Ballmer's departure.

In my opinion, Elop has failed in leadership to Nokia. During his reign, for example, Nokia saw steep decline related to the company's choice to use Windows as the primary platform for its phones. I am not alone in that some have taken to calling him “Stephen Eflop.”

This makes me wonder whether the outcome of this story would have been different with other leadership. For now, let's be positive, and wait and see what the future will bring to this new chapter in the mobile devices world.

65 comments on “Nokia & Microsoft: A New Chapter

  1. _hm
    September 4, 2013

    It is difficult time in mobile handset market. I wish all the best to Nokia and Microsoft for their future success. Innovation in design and innovation in marketting is key to quick turn around. I wish to see new products from this joint venture.

     

  2. Lavender
    September 4, 2013

    Despite sharply sales decline, Nokia still is a brand with reviving hope. In most rural regions, Nokia is available to many users because of its quality or anti-collision. 

    The seemed slowdown of smartphone innovation pace also gives Nokia time to prepare for competition. More, the acquisition by Microsoft enables cash, hardware and software support, even talents. Along with Susan noted supply chain advantage, there is reason to believe the future of Nokia. 

  3. Hailey Lynne McKeefry
    September 4, 2013

    I've been reading on this topic with interest. There are a lot of directions and arguments. I came across a copy of Steve Ballmer's email to MS employees. It gives a sense of the party line.

    It will be interesting to see how relationships with Taiwanese manufacturers will shift in the wake of these changes. Foxconn and Pegatron come to mind, as well as Nokia's current handset ODM partners Compal Communications and FIH Mobile.

    Any ideas, Susan, how these players will be affected?

  4. Susan Fourtané
    September 5, 2013

    _hm, 

    How nice you are sending Nokia & MS good wishes. 🙂 We'll see what kind of products will come up in this new era of mobile technology. Surely everyone else in the same business has already started to move their design team to work on something new for next year.

    What kind of new products would you like to see? I am still dreaming about the perfect phablet. 😀 

    -Susan

  5. Susan Fourtané
    September 5, 2013

    Lily, 

    Yes. Nokia has survived many changes along its almost 150 years. Being one of the companies with the best supply chain it can dream of, and now adding cash not being a problem, good things have to happen. 

    And about the past, well, maybe we just leave it in the past. 

    -Susan

  6. Daniel
    September 5, 2013

    “Microsoft purchased Nokia's mobile phone business for 5.5 billion euros (US $7.2 billion), ending a chapter of uncertainty and expectation in Nokia's 148 years of uninterrupted trajectory of innovation, reinvention, and change.”

    Susan, for top officials of Microsoft and Nokia, there were no uncertainties. By setting a long term goal of acquisition, former MS head joined with Nokia and Nokia embraced their windows OS. Uncertainty was only with common peoples.

  7. Susan Fourtané
    September 5, 2013

    Jacob, 

    I am referring to the whole period of the past few years were there was a lack of certainty all around what could be outcome expected. When there is so much financial struggle it's not possible to have certain about anything. 

    And about the top officials, well, it's not a secret that I don't particularly adore Elop, and the way he has managed Nokia. 

    Do you think there has not been any uncertainty at all, an any level? 

    -Susan

  8. Daniel
    September 5, 2013

    “It is difficult time in mobile handset market. I wish all the best to Nokia and Microsoft for their future success. Innovation in design and innovation in marketting is key to quick turn around. I wish to see new products from this joint venture.”

    Hm, Microsoft will try to couple windows tightly with mobile and PC, so that user will get a seamless experience. I think Microsoft will do something for that, to grab more customers.

  9. Daniel
    September 5, 2013

    Susan, uncertainty is always with the low cader peoples like employees and workers because such communications are limiting within the top managements

  10. Susan Fourtané
    September 5, 2013

    Jacob, 

    No, you don't see my point. 🙁

    There was also uncertainty in the stock market. How do you call that? 

    Why do you call employees/workers “low-level people”? I don't think that's right. 

    -Susan 

  11. Nemos
    September 5, 2013

    Undoubtedly it is not good news, for various reasons not only because of the feeling most of the Europeans feels about a Historical company (I didn't know that Nokia has a 148 year history) but because the bigger player becomes bigger and that fact is catastrophic for the most of the consumers. 

  12. Nemos
    September 5, 2013

    Jacob I am sorry but the “low cader peoples” do the “hard work” that makes the profit. 

  13. Eldredge
    September 5, 2013

    I'm sure there will be some consolidation in this acquisition – hard to believe that

    Microsoft will take on 32,000 new employees.

  14. Wale Bakare
    September 5, 2013

    >>Undoubtedly it is not good news<<

    Yes some people might feel Microsoft acquisition of Nokia not good simply because of years of history and traditions. But it's very evident in mobile phone markets how Nokia's been struggling with others even with HTC that was created yesterday. I think, buying Nokia might save it in yet unpredicted situations.

     

  15. Wale Bakare
    September 5, 2013

    >>And about the top officials, well, it's not a secret that I don't particularly adore Elop, and the way he has managed Nokia<<

    @Susan, how best could Elop have done to manage Nokia better? Mobile phone business today not just only Nokia in this circumstance. Example – Blackberry's BBM was the only USP it has since it came to market, today a different story. Whatsapp came out for all smartphones especially Android OS phones – allowing smartphone users to chat freely without any restrictions, since then Blackberry has took another hit as a result of that.

  16. _hm
    September 5, 2013

    @Susan: I may like to see a Universal device – smart phone/tablet/computer wich also includes unilimited access to data for that device. This way utility of device will increase ten folds. Microsoft can device this type of product to gain majority market.

     

  17. _hm
    September 5, 2013

    @Jacob: Yes, this is good opportunity for Microsoft and Nokia to do some real innovative work and give good alternative to Apple and Google.

     

  18. Susan Fourtané
    September 6, 2013

    Rich, 

    “hard to believe that Microsoft will take on 32,000 new employees.”

    “And probably an equal number of reindeer.”

    Reindeer with lingonberries, and mash potatoes. Unless they are vegetarian, in which case they could take pea soup. 😀

    -Susan

  19. Susan Fourtané
    September 6, 2013

    Eldregde, 

    “hard to believe that Microsoft will take on 32,000 new employees.”

    I agree. It may be another case when lots of ex-Nokias take their expertise to either existing startups, or start their own. 

    -Susan

  20. Daniel
    September 6, 2013

    “Undoubtedly it is not good news, for various reasons not only because of the feeling most of the Europeans feels about a Historical company (I didn't know that Nokia has a 148 year history) but because the bigger player becomes bigger and that fact is catastrophic for the most of the consumers. “

    Nemos, why its not a good news. Nokia already sacked their OS, Symbian and embraced windows. So, I think atleast this point of time it's a good opportunity for employees and workers for a good breath; rather than going for a wind up situation.

  21. Daniel
    September 6, 2013

    “you don't see my point. 🙁 There was also uncertainty in the stock market. How do you call that? “

    Susan,I pointed only to Nokia employees and nothing about share holders. I understood that Nokia's share value has gone down more than 100% for the last 3 years ans obliviously there was some uncertainty among the share holders.

  22. Daniel
    September 6, 2013

    “I am sorry but the “low cader peoples” do the “hard work” that makes the profit”

    Nemos, low cadre means the entry level or peoples who are working at bottom level of the cadre structure/ hierarchy. They are either an engineer or a fitter or even office boys.

  23. Daniel
    September 6, 2013

    “hard to believe that Microsoft will take on 32,000 new employees.”

    Eldredge, Microsoft already announced that from Nokia's production/ operation facility, they will sack nearly 5000 employees. I heard from one of my friend, who is working with Nokia Indian operation that, nearly 2000 employees will lose their job.

  24. Susan Fourtané
    September 6, 2013

    Jacob,

    I don't believe for a minute that MSFT is going to hire 32,000 new employees. MSFT can say anything it wants at this early point, and in front of a camera, of course. 

    -Susan

  25. Susan Fourtané
    September 6, 2013

    Jacob, 

    Those 2,000 employees are now working in India? 

    -Susan

  26. Susan Fourtané
    September 6, 2013

    Jacob, 

    When Nokia's share price went down it brought uncertainty to everybody, not only to shareholders. 

    -Susan

  27. Susan Fourtané
    September 6, 2013

    _hm, 

    “I may like to see a Universal device – smart phone/tablet/computer wich also includes unilimited access to data for that device.”

    Ahh, the perfect device. 😀 Why do you think Microsoft could bring such device to the market? Apple can very well create one of those. 🙂 

    -Susan

  28. Susan Fourtané
    September 6, 2013

    Wale, 

    What could he have done better? Do you think Elop did anything good to, and for Nokia? What? Selling Nokia at a low price to his past and future employer? That only comes to show his loyaly has always been to Microsoft, and never to Nokia. 

    This is what an analyst wrote, and I totally agree with him: 

    . . . “Nevertheless, the motivation of Stephen Elop will now come under intense scrutiny. Elop came from Microsoft and decided very quickly that Windows was the only hope for Nokia's smartphone unit, which was still selling more than 24 M units per quarter in early 2011. After he eliminated all alternative operating system options, he has now decided to sell Nokia's smartphone unit at a notably low price… to Microsoft, the company he will now rejoin.

    You don't need to be a Finn to take a moment to wonder whether Elop's loyalties have been entirely undivided over the past few years.”

    Read the whole article here: http://www.forbes.com/sites/terokuittinen/2013/09/02/nokia-sells-handset-business-to-microsoft-at-a-shockingly-low-price/

    -Susan 

  29. FLYINGSCOT
    September 6, 2013

    I am not sure Elop has the track record to lead the newest chapter of Microsoft based on what he has failed to do at Nokia.  Is this really a possibility that people are taking seriously?

     

    Also very interesting to hear of the great history of Nokia (paper, rubber and such a long time span).

  30. _hm
    September 6, 2013

    @Susan: Yes, Google is also trying to achieve similar goal. They are providing fibre optic link for faster data trasfer. They may include wi-fi hotspot to cover most common places.

    For Apple, they should work with Verizon to provide similar services.

  31. Ariella
    September 8, 2013

    @_Hm but would those two want to work together?

  32. SP
    September 8, 2013

    Yes this news must have made many emotional. Nokia was considered benchmark for mobile phones in terms of durability, robustness and look but they couldn't cope up with smartphone revolution and had to give in. Hope microsoft keeps their legacy alive.

  33. _hm
    September 8, 2013

    @Ariella: My guess for Verizon paying $140B to Vodaphone, is supported by Apple?! May be $50B cash were paid mostly by Apple. Apple and Verizon together needs to fight with giant Google. Soon it may fold out. What is your conjecture?

  34. Ariella
    September 8, 2013

    LOL @rich

  35. Susan Fourtané
    September 9, 2013

    _hm 

    Verizon is only a tiny dot in the world. If Apple plans to do something it has to do it wordwide. 

    -Susan

  36. Susan Fourtané
    September 9, 2013

    SP, 

    Indeed, it has been emotional to many. Well, maybe in 2015 there is a reason to see Nokia coming back, right?

    -Susan

  37. Susan Fourtané
    September 9, 2013

    Flyingscot, 

    He doesn't have a background as a successful CEO, not to Nokia at least. But in Microsoft thinks he did a good job there has to be a reason that is not public, isn't it?

    -Susan 

  38. t.alex
    September 9, 2013

    This merger is the obvious move. Sometime back Nokia was promoting the new N95 (running Windows 7 OS) while Microsoft independently was promoting Surface tablets. This consolidation I hope will strengthen their market share.

    Best wishes to the new Microsoft/Nokia.

  39. SP
    September 9, 2013

    @susan , surely would defi itely like to see nokia comeback but would it be practically possible?

  40. Ariella
    September 9, 2013

    @SP anything is possible. What is probable, though, is a different matter.

  41. Daniel
    September 9, 2013

    “When Nokia's share price went down it brought uncertainty to everybody, not only to shareholders.”

    Susan, agreed.  I used to watch closely the technical developments with Nokia, never looked for the share price. Not only for Nokia, for almost all brands. Less interested in share business.

  42. SP
    September 9, 2013

    Quite agree, ariella. I guess the industry has to wait and watch how things go.

  43. Daniel
    September 9, 2013

    “Those 2,000 employees are now working in India? “

    Susan, about 50% are from Indian centre and others from other centers, which spread globally. But those who are working with Nokia solutions and Networks (formerly Nokia Siemens Networks,) center got luckily escaped. If this MS acquisition doesn't happen they had planned to shorten their employment strength.

  44. Daniel
    September 9, 2013

    “I don't believe for a minute that MSFT is going to hire 32,000 new employees. MSFT can say anything it wants at this early point, and in front of a camera, of course. “

    Susan, right. may be for time being they won't go for any immediate action, but later they will sack a certain portion or reshuffle the team globally.  

  45. Hailey Lynne McKeefry
    September 10, 2013

    “Being one of the companies with the best supply chain it can dream of, and now adding cash not being a problem, good things have to happen.'

    More than past or present, trajectory is important. it feels like this is going in a positive direction–its' a natural pairing.

  46. Hailey Lynne McKeefry
    September 10, 2013

    @Susan, i think a mass exodus is a very real possiblity, both immediately and then a second wave as employees get the lay of the land and decide with more information whether the changes suit them.

  47. Susan Fourtané
    September 11, 2013

    SP, 

    Well, yes. In 2015 Nokia can come back with Nokia phones.

    -Susan 

  48. Susan Fourtané
    September 11, 2013

    Jacob, 

    That's one of the reasons I was talking about uncertainty. You see it now? 

    -Susan

  49. Susan Fourtané
    September 11, 2013

    Jacob, 

    I see. 1,000 employees from one center is quite a significant number. 

    -Susan 

  50. Susan Fourtané
    September 11, 2013

    Jacob, 

    “right. may be for time being they won't go for any immediate action, but later they will sack a certain portion or reshuffle the team globally. “

    Yes, I belive so, too. 

    -Susan

  51. Susan Fourtané
    September 11, 2013

    Hailey,

    “More than past or present, trajectory is important. it feels like this is going in a positive direction–its' a natural pairing.”

    I still believe it's early to tell.  There are plenty of things that can influence the outcome of the pairing. 

    -Susan 

  52. Daniel
    September 12, 2013

    right. may be for time being they won't go for any immediate action, but later they will sack a certain portion or reshuffle the team globally. “

    Yes, I belive so, too. “

    They already started the process by sacking 5000 employees globally.

  53. Daniel
    September 12, 2013

    “I see. 1,000 employees from one center is quite a significant number.”

    This 1000 is about 20% of the strength. I don't know what are the filtration method they are going to use.

  54. Daniel
    September 12, 2013

    “Well, yes. In 2015 Nokia can come back with Nokia phones.'

    Susan, they will come up with Nokia phone or Microsoft phone. I think they will rechristen the brand with some other name related to MS

  55. Susan Fourtané
    September 22, 2013

    Jacob, 

    5,000 people is a lot of people. And I don't think it will stop there. What do you think?

    -Susan

  56. Susan Fourtané
    September 22, 2013

    Jacob, 

    No, the name Nokia will remain, as the company was not completely sold, only a part of it. And agreement says Nokia can launch phones under the Nokia brand again in 2015.

    -Susan

  57. Susan Fourtané
    September 22, 2013

    Jacob, 

    Filtration method? 

    -Susan

  58. Daniel
    September 22, 2013

    “Filtration method? “

    Method of selection

  59. Daniel
    September 22, 2013

    “No, the name Nokia will remain, as the company was not completely sold, only a part of it. And agreement says Nokia can launch phones under the Nokia brand again in 2015”

    Susan, am not clear about it. Would you mean that Finland based nokia can still launch new phones under the same brand? Then what's the role of MS?

  60. Daniel
    September 22, 2013

    “5,000 people is a lot of people. And I don't think it will stop there. What do you think?”

    Susan I think this is just an initial step and there is no doubt that they will further drop some of their employees based on manpower audit or atleast they will be reshuffle to other projects.

  61. Susan Fourtané
    September 23, 2013

    Jacob,

    Nokia is not selling the brand name. It keeps three of its businesses, and keeps the bland name. It's only selling the Nokia Devices and Services division. 

    Maybe this clarifies? 

    Microsoft has agreed to a 10 year license arrangement with Nokia to use the Nokia brand on current Mobile Phones products. Nokia will continue to own and maintain the Nokia brand.  Under the terms of the transaction, Microsoft has agreed to a 10 year license arrangement with Nokia to use the Nokia brand on current and subsequently developed products based on the Series 30 and Series 40 operating systems.  Upon the closing of the transaction, Nokia would be restricted from licensing the Nokia brand for use in connection with mobile device sales for 30 months and from using the Nokia brand on Nokia's own mobile devices until December 31, 2015 .

    Following the transaction, Nokia plans to focus on its three established businesses, each of which is a leader in enabling mobility in its respective market segment: NSN, a leader in network infrastructure and services; HERE, a leader in mapping and location services; and Advanced Technologies, a leader in technology development and licensing.

    Nokia will retain its headquarters in Finland. Excluding the approximately 32,000 people planned to transfer to Microsoft, Nokia would have employed approximately 56,000 people at the end of the second quarter 2013.

    NSN, a wholly-owned business of Nokia since August 2013, is a leader in mobile broadband, and is focused on operating at the forefront of each generation of mobile technology, including pushing the boundaries of connecting people through LTE and future technologies. Nokia continues to manage NSN as a strong, independent entity.

    HERE will continue to focus on growing its industry-leading position through a broad location offering across mobile devices, connected devices, enterprise solutions and the automotive environment. HERE will continue to execute its strategy to become the leading independent location cloud platform company, offering mapping and location services across different screens and operating systems.

    Our Advanced Technologies business will build on several of Nokia's current CTO and Intellectual Property Rights activities.Advanced Technologies will explore new business opportunities through advanced research, development and concept products in areas such as connectivity, sensing and material technologies, as well as web and cloud technologies. At the same time, Advanced Technologies plans to continue to build Nokia's patent portfolio from this innovation and targets to expand its industry-leading technology licensing program, spanning technologies that enable mobility today and tomorrow.

    -Susan

     

  62. Daniel
    September 23, 2013

    Susan, thanks for the clarification. So they had given the licence and mobile brand name for 10 years.

  63. Susan Fourtané
    September 24, 2013

    Jacob, 

    I read this today: 

    Nokia's NOK +1.37% board of directors seems caught in a tragicomedy of epic proportions. The latest twist is Finland's largest newspaper claiming that Nokia made a false statement about CEO's bonus package last Friday.

    By early Tuesday morning, the newspaper had uncovered evidence that Nokia's board had made fundamental changes in Elop's contract compared to his predecessors.”

    According to changes implemented in 2010, Elop was entitled to immediate share price performance bonus in case of a “change of control” situation… such as selling of Nokia's handset division. 

    Through some strange coincidence, that very sequence of events actually did  happen to take place between 2011-2013. Practically instantly after Elop was handed his contract.

    They had created a strong incentive for the new CEO to drive down the company share price, sell the core business to Microsoft and then collect $25M – and this actually happened!”

    Here is the whole story: http://www.forbes.com/sites/terokuittinen/2013/09/24/nokia-admits-giving-misleading-information-about-elops-compensation/?utm_source=followingimmediate&utm_medium=email&utm_campaign=20130924

    And this from local news: 

    “Elop's 18.8 million euro payout for selling Nokia's devices and services unit to Microsoft has raised considerable disquiet in Finland. Prime Minister Jyrki Katainen and Finance Minister Jutta Urpilainen have led the criticism.”

    Here is the story: http://yle.fi/uutiset/hs_nokia_gave_false_information_on_elops_contract/6846101

    Ha! So he walked out with $25M.  

    -Susan

  64. Daniel
    September 25, 2013

    Susaan, see how a CEO can make things miserable or leading to others favorable.

  65. Susan Fourtané
    September 26, 2013

    Jacob, 

    And the story continues. Many people are furious in Finland now. From yesterday: 

    “Many in Finland, including its prime minister, find it unconscionable that Stephen Elop — the Canadian boss who led Nokia right up until the sale of its phone division to Microsoft earlier this month — is receiving a final payout of $25 million for his efforts. The sale in itself, rightly or wrongly, is perceived as a betrayal by Elop, so the lump sum payment he's now entitled to feels like adding insult to injury.”

    The story is here: http://www.theverge.com/2013/9/25/4768892/stephen-elop-rebuffed-nokia-pleas-to-take-smaller-payout

    Now he is divorcing his wife, and says he cannot take less money because her wife is not going to take less. How ridiculous is that. Who cares about what the wife wants from their personal problems? 

    Also, many people in Finland are saying that Elop made the wrong decision leaving MeeGo, and switching to Windows, and then it was just easy to sell to Microsoft, and he just found his convenience, without caring about the future of Nokia. 

    -Susan

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