Microsoft’s canny purchase of Nokia for the low price of $7.2 billion reopens up the rumors that Stephen Elop’s move to Nokia was a Trojan horse, intended to open the doors to the announcement today. Nokia’s share of the handset market under Elop shriveled while its stock price dropped over 60%, allowing Microsoft to swoop in for the killer deal. While it’s doubtful that Elop’s performance at the helm of Nokia could be considered praise-worthy, he was quick to expound when he took over that he was at the helm of a “burning platform” in his now infamous memo to employees. Currently Elop is slated to move to the position of Executive VP of Devices and Services to minimize conflict of interest issues while the deal is closing, with the idea that he will be moving to Microsoft as the Executive VP of Devices. But the CEO search at Microsoft is sparking speculation that Elop is the leading successor.

Ballmer stated that “Stephen will go from external [candidate] to internal. The board will continue [to look at] all appropriate candidates through that process.” Will Elop end up in the open Microsoft CEO position? Expect to hear more of Mr. Elop in the future. The market reacted with displeasure, shedding $12.66 billion of Microsoft market capitalization as the news was disseminated (from Friday's close to Tuesday's close). Nonetheless, Microsoft must change or move into irrelevance.

This is a good vertical integration deal for Microsoft, following in the footsteps of Apple and Google, capturing its biggest OEM. It is slated to move its gross margin take from smartphone sales from less than $10 to over $40. It further solidifies Microsoft’s current run to become the third player to break into Google- Apple duo’s dominance of the smartphone/tablet market. Javelin’s latest poll of the smartphone market share in July shows that Microsoft is still head to head with Blackberry holding onto just 5% of the primary consumer smartphone market. Microsoft’s stated strategy of building a family of devices and services fits nicely with this acquisition. With Apple Passbook's slowness to embrace payments, Microsoft has an opening to move ahead with Nokia's NFC capabilities. And similar to the messaging during the Google-Motorola purchase, Microsoft is reassuring its other OEMs that this move will not affect their relationships. Meanwhile BlackBerry retains a solid hold on third place in the business segment of the smartphone market, and is looking for a suitor. Could lightning strike twice?

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About Mary Monahan

Mary Monahan is Executive Vice President and Research Director of Mobile for Javelin Strategy & Research.

Mary brings 10 years of successful direct financial services industry experience to her clients.  Before joining Javelin, she was a Vice President at Wells Fargo Bank where she supervised a $650 million portfolio of commercial, consumer, and real estate loans; and co-directed lending for 35 retail branches, five business-lending centers and one real estate loan center. She specializes in the psychology of why people spend money and the implication for mobile initiatives.

Ms. Monahan’s prior experience includes:

  • Vice President, Commercial Banking Group, Wells Fargo Bank, Los Angeles County, CA.Marketed and managed tailored financing services to growth companies.
  • Assistant Vice President and Manager, Business Lending Center, Wells Fargo Bank, Southern CA. Tripled portfolio; penetrated new strategic asset area for bank.
  • Loan Supervisor, Retail Banking Group, Wells Fargo Bank, San Jose Region, CA. Co-supervised a $652 million portfolio of commercial, consumer, and real estate loans; Co-directed lending for 35 retail branches, five business-lending centers and one real estate loan center; Managed loan officer training and mentoring.

Ms. Monahan holds a B.A. in Economics/English from San Diego State University and an MBA, with a concentration in Finance, 2000, from the Graduate School of Management, University of California at Davis. Ms. Monahan was awarded the University of California Scholar’s Grant and the Faulkner Fund Grant. She resides in the San Francisco Bay Area.

 

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