Microsoft 2015

Abstract

On July 8, 2015 Satya Nadella CEO of Microsoft announced that the company would lay off up to 6% of its workforce in its phone business unit, and write off $US7.6 billion from Nokia’s deal. This announcement sounded as a surprise to many industry observers as it came just one year after Microsoft acquired Nokia’s Devices division for US$7.2 billion. This appeared to many people as a confirmation that Microsoft had failed in its attempt to diversify into mobile hardware solutions with the Nokia acquisition. The story between Microsoft and Nokia dates back to 2011 when the two technological giants signed a strategic alliance. Steve Ballmer, then CEO of Microsoft saw in this partnership an opportunity for Microsoft to compete on the mobile phone market by controlling both hardware and software. Rooted in Ballmer’s “Devices and Services” strategy, the acquisition seemed a logical step. But two years after the acquisition, Microsoft is still struggling to break into this market dominated by Google and Apple. Even though it was not Nadella’s decision to acquire Nokia, he wonders what went wrong in this acquisition. Was the acquisition the right decision in the first place? With the release of Windows 10 at the end of July 2015, he knows that he will have to decide what to do with Microsoft’s phone business. Should they exit the business? Focus only on software, or keep on trying the vertical integration of the business?

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