Tom Warren:

Nokia sold nearly 251 million handsets last year, a mixture of feature phones and smartphones. While the Lumia lineup of Windows Phones only accounted for 30 million of that 251 million, Microsoft now has to plan and manage how it handles the millions of other devices that Nokia produces that do not run Windows Phone. That’s a mixture of Asha handsets, feature phones, and Nokia’s new Android-based X range. It’s a big worldwide business that places Nokia in second place behind Samsung in the top mobile phone manufacturers. Microsoft is now the world’s second largest phone manufacturer by sales.

Not sure which is crazier: that Microsoft is now the number two phone manufacturer in the world — or that only 30 million of the 251 million phones Nokia sold were Lumias?

Lots of good nuggets from Dina Bass, Beth Jinks and Peter Burrows on the end of the Steve Ballmer tenure at Microsoft:

Several directors and co-founder and then-Chairman Bill Gates — Ballmer’s longtime friend and advocate — initially balked at the move into making smartphones, according to people familiar with the situation. So, at first, did Nadella, signaling his position in a straw poll to gauge executives’ reaction to the deal. Nadella later changed his mind.

Strike 1. And in other words, Nadella was against it before he was for it. We’ll see how that ends up playing out now that he’s the man…

Ballmer was so loud that day in June his shouts could be heard outside the conference room, people with knowledge of the matter said. He’d just been told the board didn’t back his plan to acquire two Nokia units, according to people with knowledge of the meeting. He later got most of what he wanted, with the board signing off on a $7.2 billion purchase of Nokia’s mobile-phone business, but by then the damage was done.

Strike 2. But:

The tablet Microsoft finally came out with in October 2012, the Surface, was a dud. Windows 8, with a touch-based design, was released to mixed reviews. The smartphone operating system, Windows Phone, wasn’t a hit either — but Ballmer remained committed to it. A deadline was looming that would result in one of his last rolls of the dice.

Nokia made about 80 percent of handsets using Windows Phone, and the arrangement was set to expire in February 2014. Nokia had been dropping hints it might start making devices to run on Google’s Android platform. Ballmer needed a way to keep Nokia in Microsoft’s world.

Hard to see what other choice Ballmer had. Without Nokia, Windows Phone was effectively finished. Instead, Ballmer was. He struck out.

One more thing:

As Microsoft continued to lag behind rivals, some directors grew more unhappy. Ballmer had introduced Mulally as part of the company’s succession planning, and those on the board looking for ways to move Ballmer out talked in July about hiring the Ford CEO as a way to persuade the CEO to step down. In August, Ballmer, 57, announced he would retire, earlier than planned.

Interesting that it was Ballmer who ushered Mulally into the Microsoft mix, effectively sealing his fate…

Tom Warren:

Multiple sources have revealed to The Verge that Normandy is designed as an Asha equivalent to push low-cost devices with access to more traditional smartphone apps — something the company has struggled to achieve for its Series 40-powered Asha line. Nokia’s effort is similar to Amazon’s own use of Android, allowing the company to customize it fully for its own use. Nokia employees working on Normandy were informed the device is planned as a 2014 release, and one insider described the Normandy effort as “full steam ahead.” Unless Nokia manages to release Normandy ahead of its Microsoft deal, we can’t imagine Microsoft is interested in using Android to target the low-end over its own Windows Phone operating system.

Filed under: why Microsoft had to buy Nokia.

Adam Satariano & Douglas MacMillan:

Ultimately, it comes down to where developers can make money — and that’s not with Microsoft, said William Hurley, a co-founder of Chaotic Moon, a maker of apps for companies including Walt Disney Co. He said the company’s most recent game, “Dragon Academy”— which is free to download, with consumers paying for upgrades — generated more in one hour of sales on Apple devices than was made through all of Chaotic Moon’s releases globally for Windows Phone in the past year.

Ouch. Even spending an infinite amount of money, it’s hard to see how Microsoft overcomes this. It’s exactly why being so late to the game was so damning.

Nick Wingfield on the surreal tale of the Microsoft/Nokia negotiations:

Mr. Ballmer and Brad Smith, Microsoft’s general counsel, were walking across the law firm’s lobby, when Mr. Ballmer — absorbed in reading a document from Nokia related to the deal — tripped on a glass coffee table. Letting out a loud shriek, Mr. Ballmer fell to floor, hit his head and began bleeding above his eyebrow.

Executives from Nokia sequestered in a conference room elsewhere in the offices were baffled by the sound, wondering whether Mr. Ballmer was reacting badly to a counter-proposal they had made. His security detail patched him up, and Mr. Ballmer resumed negotiations.

By the afternoon of the next day, participants in the discussions noticed the coffee table was gone.

I’m not sure which is more strange:

a) This detail.

b) That Ina Fried is reporting nearly the exact same weird story at the exact same time.

Also odd: that it was seemingly Nokia’s mapping service which was the single biggest holdup in the deal. That shows just how far the handset business has fallen. “Leave the maps, take the handsets.

Matthew Campbell & Aaron Kirchfeld reveal a few new details behind the Microsoft/Nokia deal:

Ballmer, who had initiated the talks, felt that Microsoft needed to own a branded consumer device, said a person with direct knowledge of the situation.

Which is why this is essentially the end of “Nokia” as a phone maker. Presumably, we’ll now get “Microsoft Lumias running Windows Phone” or some such. 

Also worth noting:

Meanwhile, Redmond, Washington-based Microsoft is keeping an eye on BlackBerry Ltd., the people said. The Canadian manufacturer has said it’s seeking a buyer, and its strong presence in the enterprise market could still attract interest from Microsoft, they said.

Microsoft may yet get to figure out if -1 + -1 can be made to equal 2.

Ben Thompson wonders (as I think we all are) why would Microsoft do this deal now when they already essentially have everything they would want from Nokia:

I theorize that Nokia was either going to switch to Android or was on the verge of going bankrupt. (I suspect the latter: part of the deal included €1.5 billion in financing available to Nokia immediately, and the fact Microsoft had to take Asha but not the brand or maps suggests they were trying to keep the price as low as possible). And, had Nokia abandoned Windows Phone, then Windows Phone would be dead.

The loan aspect of this deal is very interesting and seems to say a lot. Exactly in line with my thinking in June.

Mary Jo Foley:

Some company watchers — possibly the ValueAct crew, among others — haven’t bought into this idea. ValueAct officials haven’t said explicitly that they think Microsoft should exit the devices and consumer markets, but the implication is definitely there. And there have been repeated calls by Wall Street for Microsoft to either sell off or at least split off some of its businesses like Xbox and Bing.

Adding Nokia to the Microsoft mix could make it a lot more difficult to justify carving up Microsoft along devices and services/software — or consumer/enterprise — lines. Are smartphones consumer or enterprise? What about Lumia phablets or tablets?

An interesting thought: that the Nokia deal was also done to ensure a “One Microsoft” future rather than the company being forced to create a half-dozen “Mini Microsofts”.

Whoa nelly. A few quick thoughts:

1) Inevitable.

2) This seems to take the drama out of the Microsoft CEO search. Nokia CEO Stephen Elop (a former Microsoftie) was already widely considered a leading contender — and now Microsoft has 7.2 billion more reasons to go with him. It also seems likely he would be a good candidate to carry out the “One Microsoft” initiative that Steve Ballmer has already put in place.

3) Fairly big demotion for Julie Larson-Green following her big promotion just last year. Unless… see: #2.

4) So why not just announce Elop as the new CEO now? Because the deal won’t close until Q1 2014. The biggest potential hiccup there is Nokia shareholders approving it.

5) From a pure dollar perspective, this seems to be quite the deal from what Microsoft was rumored to be considering paying just a few years ago.

6) Though it’s not nearly as good of a deal as Apple got to bring Steve Jobs back on board — $400 million in 1996 dollars.

7) Microsoft is taking on 32,000 new employees?!

8) It’s actually a pretty decent use of overseas cash, which would otherwise be taxed if repatriated.

9) Lighting the money on fire would have also saved it from being taxed.

Philip Elmer-DeWitt:

Last quarter, Apple finally made a major acquisition. And what did it buy?

It bought Apple.

By my (revised) calculation, the company spent $16 billion last quarter ($4 billion in cash, $12 billion through the so-called accelerated share repurchase program) to purchase 32.5 million of its own shares at an average price of about $492.

For that kind of money, Apple could buy Nokia. Or BlackBerry three times over.

Yeah, but buying Nokia or BlackBerry would have been horrible investments…

thatfrenchman asked:

Your naivety over Nintendo is astounding. They simply will never give up their properties to iOS or any other mobile platform. Sure, the Wii U is failing (and rightly so, it's a sub par, last gen, slow system), but their DS and 3DS business is doing just fine. I do foresee a future where they focus on portable gaming only, but it'll be with their own hardware.

This reminds me exactly of the mentality around both BlackBerry (RIM) and to a greater extent, Nokia in the past several years. Someone would say something about how these guys are dropping the ball and the writing seems on the wall for a major disruption to their position in the market, and the response would be along the lines of: YOU’RE A MORON, HAVE YOU SEEN NOKIA’S MARKET SHARE COMPARED TO APPLE’S??? THEY’RE DOING JUST FINE!

The problem Nintendo faces, just as Nokia and BlackBerry before them, is that while they’re in a precarious position with the market shifting right now, it’s only going to get worse as that shift accelerates. 

I’m not saying that Nintendo is going to go out of business anytime soon, I’m saying that they will face some very tough choices sooner than you seem to imagine. At that point, someone — be it new leadership or a buyer — will come in and see the untapped value just sitting on the table with Nintendo’s game IP. I’m not saying that’s necessarily the right thing to do. I’m just saying it will happen. The wheels are already in motion.

Sharon Terlep, Dennis K. Berman, and Shira Ovide:

The two sides held their discussions in London and were close to an oral agreement about a combination, one of the people said. More than two years ago, the companies struck a partnership for Nokia to use Microsoft software exclusively to power Nokia smartphones. The partnership so far has failed to significantly lift the companies’ mobile fortunes.

But Microsoft essentially "bought" Nokia two years ago, so I’m not sure why they’d waste the billions on a full acquisition now. Unless they really need to further prop the company up…