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Tuesday, September 24, 2013

Smartphone Wars

I am no conspiracy theorist but consider the following figures of Nokia's Market Cap over the last 5 years, in the context of Microsoft's acquisition of Nokia's phone and services business .


Even on Sept 25, 2008 Nokia's Market Capitalzation was 76.86B. Today, Sept 24, 2013, it is 24.87 B.

Was Stephen Elop, the CEO of Nokia (since Sept 2010; he worked for Microsoft as the head of the Business Division from January 2008 to September 2010. He will be joining Microsoft again as an Executive Vice President) a Trojan Horse, planted to devalue the company and prepare it for acquisition by Microsoft? Was he someone the board of directors anointed to help them sell the firm in bits?

Imagine you own a startup, which for practical reasons you can't continue to run anymore. (Competition, cost of doing business, other commitments). Subsequently, you decide to sell it with an initial asking price 10 million. But you get no buyers so you hire a consultant  to 'trim the fat'.  He/she suggests to close/get rid of some non-profitable businesses even if they are unique to your company. (In February 2011, Nokia announced that it would use Microsoft's Windows Phone OS as its primary Smartphone platform, and Symbian will become its franchise platform.) After the haircut and grooming, your company is ready to visit the marketplace. A wooer who was waiting immediately makes an offer of 6 million. You will take what you get. Only for Nokia, it is billions of dollars less than it would have been even 5 years ago.

Elop will receive nearly €19 million (€4.2 million in salary and bonuses and €14.6 million worth of share price-linked bonuses) from the deal.

Sharing intellectual property rights between the two companies  was an impediment to developments in the past. Now, Microsoft can speed up the progress of Window phone devices, just in time when Apple is struggling to make even marginal improvements.

Everybody wins. No?

Unless the Nokia shareholders sue someone.

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