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Behind the Microsoft Write-Off of Nokia
UnknowingFool writes: Previously Microsoft announced they had written off the Nokia purchase for $7.6B in the last quarter. In doing so, Microsoft would create only the third unprofitable quarter in the company's history. Released on July 31, new financial documents detail some of the reasoning and financials behind this decision. At the core of the problem was that the Phone Hardware business was only worth $116M, after adjusting for costs and market factors. One of those factors was poor sales of Nokia handhelds in 2015. Financially it made more sense to write it all off.
Where phone companies go to die.
Microsofts prior, and arguably present business model of violently entering a market thats been dominated for 3-4 years with an identical product is something of a relic from Steve Ballmer. Its only ever been effective during the browser wars, when microsoft made IE an inextricable part of their OS and every subsequent update or patch forced the default browser to IE conveniently. In the hardware world things like the Zune and the phone were recognizable flops in every market segment but remained a going concern, with significant marketing and advertising to boot. Even the tablet, surface, experiences this as it takes multi million dollar losses every year and enjoys no real marketshare. Why?
Two things: Perpetual corporate licensing and XBox revenues. These are, arguably, microsofts only source of immediate revenue anymore. the OS is given away with every PC, and things like Azure and the upcoming Windows Watch will have to be priced lower than their competitors. What microsoft has is the real power to sustain a dead-on-arrival product, seemingly indefinitely, off these two revenue streams. Microsofts dated logic is that it doesnt have to make a better product for customers, it just has to outlast competitor offerings until price and marketing somehow win over customers. once the product fails, it simply rolls it under the carpet and chases the next white dragon, dated 3-4 years, and offers a similar product in a desparate attempt to remain relevant in a particular market.
Good people go to bed earlier.
Kramer : It's just a write off for them .
Jerry : How is it a write off ?
Kramer : They just write it off .
Jerry : Write it off what ?
Kramer : Jerry all these big companies they write off everything
Jerry : You don't even know what a write off is .
Kramer : Do you ?
Jerry : No . I don't .
Kramer : But they do -- and they're the ones writing it off!
It's almost as if companies exist to earn as much money as possible
How on earth does a $7.6 billion loss fit into the narrative of making as much money as possible?
SJW n. One who posts facts.
So, everything was fine until Microsoft somehow (the article doesn't say) determined that goodwill was worth only $116 million instead of $5.4 billion. That's huge. This is the crucial piece that makes it all "make sense".
Microsoft bought their rival and destroyed them. It's all done now, Nokia isn't coming back. Microsoft can rest easy now, the threat to Windows Phone has been eliminated. It cost billions, but that's OK. Plenty more where that came from. What's the point of being a huge corporation if you can't do things like this from time to time? It's time to stroke a Persian cat and sip a snifter of brandy. The Company has been saved.
Shutting down free speech with violence isn't fighting fascism. It IS fascism!
The fact that Microsoft not only could write this off, but did write this off shows how little they care about anything but the bottom line.
Umm, writing this off does not in anyway improve their bottom line. Quite the opposite in fact. It's an admission that they bought something for a lot of money that is now worthless. What it shows is that they are not doing a very good job of maintaining the bottom line because the company is throwing money at bad investments. It's also a strong indicator that management at the time (read Balmer) was of questionable competence.
I can't be the only person in the US who purchased said phone, can I?
No but you aren't in a large crowd. I know I can count the number of Windows Phones I've seen in the wild on my fingers. Windows Phone was pretty much a solution nobody asked for several years later than anyone cared. Android and iOS already were large and dominant and developers weren't really looking to support a third platform. Technically it's probably fine but it offers nothing that people care about that the competition doesn't already have.
Furthermore Google is basically giving Android away so the handset makers have no incentive to care about Windows. Why would Samsung want to pay Microsoft for a product nobody wants anyway? Microsoft lacks the design culture and brand to compete with Apple on the high end (through vertical integration) and Google is undercutting them on price on the low end. Frankly I think Microsoft is screwed in the mobile phone market. I just don't see a path to profitability for them.
Depending on how you look at it, Elop did a great job.
1) The comapny was already dead
2) He managed to get a lot of money for the company
I would say that that is a great job, unless that was not his (real) jobdescription.
Don't fight for your country, if your country does not fight for you.
"When the first U.S. public corporations were created in the early 1800s, corporate charters were granted by the state legislatures for very specific purposes. The charters specified that the corporations met what was considered to be a worthy public purpose and contained strict restrictions, such as the length of time the charter lasted and what, specifically, the corporation could manufacture. In the mid-nineteenth century, it wasn't unheard of for states like Ohio, Michigan, New York and Nebraska to revoke corporate charters when corporations no longer fulfilled their purpose."
We should return to enforcing and revoking corporate charters when they fail to serve the public interest.
http://www.huffingtonpost.com/ralph-nader/corporate-charters_b_2759596.html
We know where leadership by an anti-intellectual "strongman" who scapegoats minorities and likes boisterous rallies goes
I owned a N800 and N900. Maemo was good and would have allowed Nokia to maintain the control and distinctiveness they had with Symbian. With support for Android apps, it was a win-win. They needed united support for Maemo internally, but instead got Elop. Elop decided to throw out Maemo and Sybian and throw everything behind Windows Phone. The rest is history.
Going Android would have been a bad move also, because they would have no edge over the other Android players. Having their own OS with support for Android apps was a better solution.