13 Comments

Summary:

Contrarians say BlackBerry, for all its struggles, would have been a much better acquisition to help Microsoft penetrate the enterprise mobility market.

Skype preview Windows Phone 8

We all know Microsoft wants to move on with its “devices and services” push but since the devices part of that effort is now pinned largely on Microsoft’s $7.2 billion buyout of Nokia’s smartphone business, some folks just can’t forge ahead. The fact is, the Nokia deal, announced early this month, still sticks in the craw of many who contend Microsoft paid too much for too little way too late.

AT&T BlackBerry Q10Early Friday, Nomura Securities analyst Rick Sherlund cited the deal as the main reason he cut his Microsoft earnings estimate. Sherlund cut his projected FY 2014 earnings per share to $2.49 from $2.60 “to reflect the estimated impact from the pending Nokia acquisition .. and to a lesser degree some additional lower growth and margin assumptions,” he wrote in a research note. Sherlund’s numbers assume that the deal closes as expected in March; Microsoft’s fiscal year ends June 30, 2014.

Others, including former Microsoft execs, are even less bullish on the Nokia buy. If Microsoft wants to focus on business users, it would have been smarter and cheaper to buy BlackBerry, which is struggling mightily (it just reported a $1 billion loss) but still holds key business accounts with its BlackBerry Enterprise Server (BES), they say. Albeit privately.

“The irony is MSFT bought the wrong ,” one former Microsoft exec said via email. “BlackBerry has enterprise presence, was half the price and [is] on the same continent. MSFT just added 30,000 employees in Finland. Google is now making Moto X in Texas. Stupid acquisition.” 

One rationale for the deal  — that Nokia accounted for 80 percent of Windows Phones sold — is a non-starter in his view. “Eighty percent of a small number is an even smaller number. Microsoft should have milked the BES business and offered a better Windows Phone alternative. Instead they are going to fight it out on the airwaves and in shopping malls ( only a small percentage of malls where they actually have stores ) across the county.”

Others say the strength of BlackBerry lies in its compact and secure phone OS. “That’s the real asset — that OS is exceptional and there would be a lot of opportunities to embed that in cars and other non-phone devices,”said one industry pundit.

But, he cautioned, the BlackBerry OS wouldn’t fare well at Microsoft, which, after all the angst of the last few years, still wants to slap Windows everywhere.

So I pose it to you GigaOM readers: Would BlackBerry have been a smarter deal than Nokia? Use comments to opine away.

  1. For good or ill, Nokia already has a pipeline full of Windows Phones and probably contracts with carriers, retailers, etc. to deliver them. If Microsoft bought Blackberry, it would be a year or two before any phones with their OS could be produced, let alone find their way into retail channels. I would think that timing alone would create a value premium over Blackberry.

    Share
  2. Who said they won’t buy Blackberry when this acquisition closes (if it does in fact)?

    Share
  3. Wait, buy Blackberry and then actually keep Blackberry OS? Why the heck would they do that, when it doesn’t advance ‘Windows everywhere’?
    Not saying the company would be a bad buy. Just saying the strategy above is not right.1

    Share
  4. What these so-called Analyst’s are forgetting is that Nokia’s 2012 revenue will be included in Microsoft’s 2014 revenue… So you basically buying $25B revenue for a cost of $7.2B

    Share
    1. Not one analyst is forgetting that. Revenue is simply not an interesting thing to be buying.

      Share
  5. No. BB user loyalty will NOT translate to Windows Phone loyalty. It is non compatible upgrade. So no value at all to microsoft – just adds cost and complexity.

    That said, Nokia may be a long painful mistake. Take a hard look at the technology in the iPhone 5S. It may take MSFT/NOK 2 to 4 years to catch up.

    Share
  6. Can you elaborate on that last statement there? I don’t see anything that’s oh so far ahead of the competition in the iPhone 5s technology-wise, other than say.. a fingerprint reader. Sure, the processor is 64-bit.. so? Please enlighten us.

    Share
  7. A 64 bit processor makes the 5s a PC. That’s a PC the size of a wallet. Cool.

    Share
    1. The quantity of bits on a processing bus does not qualify a device as a PC.

      Share
  8. I believe 32 bit “personal computers” were also referred to as PCs. So, sir, with all due respect, 64 bits does not qualify the iPhone 5s as a PC.

    Share
  9. So what you mean to say is that a 32 bit “personal computer” is not a PC? mind = blown.

    Share
  10. I think Nokia is a good purchase by Microsoft. They are making some good software and hardware now. Only thing I see Microsoft can take from BlackBerry is setup a booth outside BlackBerry’s HQ in Canada and hire their engineers and testers. :)

    Share

Comments have been disabled for this post