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Nokia's Elop Faces Backlash Over Microsoft Partnership

Strategic Insights

— 1 min read

As the world's largest maker of phones, Nokia Corp.'s decision to ditch its smartphone software in favor of Microsoft's has left investors and employees reeling. Company president Stephen Elop, a Canadian and the first non-Finn to lead Nokia, is now facing pressure to justify the move. In an effort to calm the storm, Elop addressed investors and employees at the world's largest cellphone trade show in Barcelona, Spain. However, his words may not be enough to placate those who are concerned about the company's future.

Key Takeaways:

  • Nokia's stock fell 14% after the Microsoft deal was announced, and a further 4% in midday European trading on Monday.
  • Employees showed their displeasure by walking out of work en masse on Friday.
  • Elop stated that the deal will lead to billions of dollars for Nokia from Microsoft.
  • The partnership aims to create a "three-horse race" in the smartphone market, with Nokia, Microsoft, and Google competing against each other.
  • Elop argued that adding Nokia's production capacity to the already crowded field of Android phones would have led to a sharp decrease in prices.
  • The location and mapping services provided by Nokia complement Microsoft's web search services, making the partnership beneficial for both companies.
  • The deal was motivated by the fact that Microsoft had more to gain from Nokia's support than Google, which already has a strong presence in the industry.
  • Sony Ericsson's CEO, Bert Nordberg, expressed concerns that the partnership may be too dominant and could erode the power of wireless carriers.

Statistics:

  • Nokia's worldwide market share in smartphones was just over 30% in the fourth quarter, down from 40% a year earlier.
  • The company's stock lost 14% after the Microsoft deal was announced.
  • Elop had 4.5 months to go through his "emotional journey" before making the final decision.
  • Samsung is expected to lose market share to Nokia as a result of the partnership.

Sources:

  • Toronto Star, 2011
  • Manu Fernandez/AP

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