Two years after hitching its fate to Microsoft’s Windows Phone software, the Finnish phone maker that once dominated the global market collapsed into the arms of the U.S. software giant, its mobile business ravaged by nimbler rivals Apple Inc and Samsung Electronics.
Shares in Microsoft slid as much as 6 percent in the afternoon, lopping more than $15 billion off the company’s market value, as investors protested the acquisition of an underperforming and marginalized corporation that lost more than $4 billion in 2012.
Retiring CEO Steve Ballmer is trying to remake Microsoft into a gadget and services company like Apple, a move that has not won the endorsement of all shareholders.
Nokia CEO Elop, who ran Microsoft’s business software division before jumping ship in 2010, will return to the U.S. firm to head up its mobile devices business just as the company’s board considers a successor to Ballmer, who announced last week he will retire within a year.
Elop, who presided over Nokia’s market share collapse and a shriveling share price during his three years at the helm, is being discussed as a potential replacement because he remains respected and is considered one of the few who can fully grasp Microsoft’s sprawling empire.
But disgruntled Finnish media labeled him a Trojan horse who handed over the keys to one of the few remaining European technology powers. Nokia, whose market value topped $200 billion over a decade ago, will now concentrate on its networking equipment unit, navigation business and technology patents.
The Nokia deal thrusts Microsoft deeper into the hotly contested mobile phone market, despite some investors urging it to stick to its core strengths of business software and services. Activist fund manager ValueAct Capital Management, which has been offered a board seat, is among those concerned with Ballmer’s leadership and his attempts to plough headlong into the lower-margin, highly competitive mobile devices arena.
“Adding to the cost structure when shareholders may be looking for steps in the other direction is not likely to be well received…,” said Nomura analyst Rick Sherlund. “Perhaps a decision to repurchase stock and up the dividend would be a good idea right about now.”
Others applauded Ballmer’s aggressive gambit.
“Microsoft cannot walk away from smartphones, and the hope that other vendors will support Windows Phone is fading fast. So buying Nokia comes at the right time,” said Carolina Milanesi, an analyst at Gartner.
“In today’s market it is clear that a vertical integration is the way forward for a company to succeed. How else could Microsoft achieve this?”
As part of Microsoft, Elop will head an expanded Devices unit. Julie Larson-Green, who in July was promoted to head a new Devices and Studios business in Ballmer’s reorganisation, will report to Elop when the deal is closed.