- "Microsoft too, under Steve Ballmer, has said "it's all about services," but the current Nokia platform is poorly positioned to garner anything more than the current 2-3% of all handset sales."
- "When the Nokia deal goes through I will be curious to read the level of charges taken for workforce reductions in Finland and for the allocation of the purchase price to intangibles and to goodwill. That will tell a lot about this story will work, or not, in the future."
Wednesday, July 15, 2015
Microsoft Says "Näkemiin" to Value from Nokia
Just before the closing of the Nokia acquisition, we had our doubts about Microsoft's ability to realize value from it. Some comments,
Well, the auditors went along with whatever rosy forecasts Microsoft had for handset sales, and they waited. CEO Nadella made very bullish comments about understanding how app developers looked at the world; he was very bold in personally engaging with them about the future merits of writing for Windows 10 on multiple platforms, including tablets, combos, and mobile.
Bulls talk about the fact that a $7.6 billion impairment charge on a less than $8 billion acquisition, net of cash, only enhances shareholder value because losses will be stemmed after the restructuring and the company can get on with its business of being a cloud services and enterprise software company. That is a pretty mechanical, textbook accounting view of the world.
As a shareholder, what if your company continues to trail developments in its industry? What if it is always the perennial bridesmaid, late for her own wedding? As a pure play cloud company, MSFT is probably overvalued, or fairly valued at best.
What is the future for Windows Phone owners? What if 2% of the handset owners switch over to Android?
HP recently released a Red for its upcoming creation of HP Enterprise. Among the reasons for the split, there was nary a single one that had to do with how the company put on a better face or presented a better value proposition to customers. The rationale had to do with other things: you can guess what they were.
After announcing the write-off of Nokia, it is very unclear what the Microsoft value creation proposition is going forward. "One Windows Experience" across all platforms is pretty lame. What if there is no one on the mobile platform? Windows 10 has some slick features as far as controlling and working with smart tvs and other devices, but this isn't a big deal. It's just catch-up....again.