Back in February 2011, (then) newly-installed Nokia chief executive Stephen Elop was under no illusions about what needed to change at the company.
It needed nothing less than a ‘radical change in behaviour’, he wrote in a memo to workers. Using an analogy that’s now gone down in tech history, he liked the company’s position to that of a man standing on a burning oil platform.
‘He could stand on the platform, and inevitably be consumed by the flames. Or, he could plunge 30 meters into the freezing waters,’ he wrote.
We’re not sure whether Nokia has just discovered a last-minute lifeboat – or has plunged headlong into the drink. The company’s mobile devices manufacturing business has been bought by Microsoft for €5.44bn (£4.6bn). Under the deal, the software giant will pay €3.79bn for Nokia’s mobile manufacturing arm, and €1.65bn for access to its patents.
What’s interesting is this means Microsoft has come full circle: having gone through the nineties and early noughties as strictly software-only, with this acquisition it has just become a fully-fledged hardware manufacturer, making every type of computer – from tablets to gaming devices to smartphones. Or, if you prefer: it’s now a fully-fledged Apple rival.
At the centre of speculation surrounding the deal is Stephen Elop, the Nokia chief executive whom the Finnish phone manufacturer poached from Microsoft’s senior ranks back in 2010.
Just a few days ago, the overwhelming view was that Bill Gates should stage a glorious return to replace outgoing chief executive Steve Ballmer, who announced his resignation two weeks ago. Now, with Elop about to return to Microsoft, all eyes have turned to him. At least we know that, like Ballmer, he writes a good memo. Is he a better dancer, though? That's the important question...
So from a leadership perspective the acquisition makes sense. And from a strategic perspective it makes sense too: a couple of years ago, Nokia put all its eggs in Microsoft’s basket, announcing all its smartphones would be powered by Windows Mobile, Microsoft’s answer to the Android operating system.
Will tying one of the tech sector’s fading stars to another revive the fortunes of both?
Microsoft is clearly playing the long game. Lumia, Nokia’s biggest-selling Windows phone, has received good reviews. It’s just taking a while to catch on: in the last quarter, it sold 7.4 million devices, compared with the iPhone’s 31.2 million sales, and the 23 million shipments of Samsung’s Galaxy S4.
But Microsoft’s goals aren’t exactly ambitious: at the moment, its operating system accounts for a 4.4% share of the market, compared with Apple’s 26.3%. By 2018, Microsoft wants this to have increased to 15%.
In other businesses, that might sound like a lot, but the smartphone game moves faster than most: five years ago, the iPhone had only been around for a year and BlackBerry was the undisputed king of the smartphones. So with that level of ambition, Microsoft is doing itself a disservice. With BlackBerry's future looking less than rosy, there's a space for a business-oriented smartphone just waiting to be filled.
Going in at a time of big change at Microsoft is probably a good thing for Nokia: it will allow it to integrate more easily. The signs, and the sentiment, are positive: now it’s up to Elop et al to make it work. Whether this is a lifeboat or a clear risk, what’s certain is that Nokia’s off the burning platform now.