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Microsoft’s Nokia acquisition is officially a failure

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Microsoft’s Nokia acquisition is officially a failure

He didn’t say so explicitly. But in his open letter to Microsoft staff, CEO Satya Nadella admitted that the purchase of Nokia’s devices and services business, completed last year, has been a costly failure.

Delivering the bitter blow to staff that there would be a ‘headcount alignment change’ of 7,800 globally, Nadella also revealed that the company would be taking $7.6 billion (£4.93 billion) ‘impairment charge’.

That means the value of the Nokia arm of the business is less than what appears on the books.

Essentially, it’s a case of Microsoft writing off the purchase, less than two years after it revealed it was buying the Finnish firm for $7.9 billion.

satya nadella

On top of that, Nadella said that the company would be spending between $750 million and $850 million restructuring its phone business.

It’s not exactly a shock. The Nokia team was recently folded into the Windows devices and services division of the business.

Shortly after, one-time Nokia CEO Stephen Elop left the company, having overseen the deal which initially saw Nokia get into bed with Windows Phone in 2011.

Stephen Elop CEO Nokia

Nadella made all the right noises in his letter.

He wrote: “We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family.”

Funnily enough, that was the Windows Phone strategy when the platform first launched.

It was an utter failure, with consumers preferring iPhones and Android devices to the clunky, under–serviced efforts from the likes of Samsung and HTC.

Surely though, Nadella is deluded if he thinks Windows Phone can ever be a success on the scale of Android or iOS.

microsoft lumia 640 mwc

Does he honestly believe that Microsoft devices "will spark innovation, create new categories and generate opportunity for the Windows ecosystem more broadly".

Surely that’s just a sop to make company staff feel better about such an egregious waste of funds.

The irony is that Nokia is set to return to making phones next year. They may not sell heavily, but at least it’ll be on its own terms again, without an ecosystem that users have roundly rejected.

Researchers at IDC said that Microsoft’s Windows Phone managed a piffling 2.7% market share in 2014. Android was on 81.5%, iOS on 14.8%.

Frankly, Microsoft can’t compete.

Perhaps it’s time it mothballed its Lumia business and got back to focusing on enterprise. Because Windows Phone and the Nokia buyout have been nothing short of disastrous.

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