Ballmer-Elop: $7.6b, 32,000 jobs -- all gone

19 Aug 2015

As featured in DisruptiveViews

I read with fascination an article in Tech Republic praising the performance of Microsoft over the last decade and thought at first that the writer Matt Assay had partaken of some mild-altering substances or, at the very least, was on the Microsoft payroll.

But closer inspection of the piece revealed that the Redmond giant had indeed been a star performer, in market terms, if not the greatest innovator over the same period. But how much better could it have done had it not been so poor at innovation and without those unbelievable investments made under Ballmer?

No company can live on its past merits (or as Assay puts it: its Mesozoic products) for very long, yet Microsoft does appear to be beating the odds. But for how long?

New CEO, Satya Nadella, has certainly started on the right foot by distancing himself and the company from one of the worst blunders previous management made, i.e. the Nokia fiasco.

His perseverance with bringing Windows 10 to market and offering it as a free upgrade is commendable but he only had to look at how Apple had managed its software for the last twenty years to learn that lesson. Microsoft needs to keep as many companies and customers in the fold as possible until it gets its ‘ducks in a row’ and starts showing some innovation leadership again. And I don’t mean by bringing out yet another version of the Surface.

Pride, arrogance or poor management?

Was it pride, arrogance or poor management that had Microsoft falling behind the mobile revolution led by Apple iOS and Google’s Android? Why did it persist with Windows Phone despite release after release of market disasters?

I remember with anger buying an early HP phone powered by Windows that met an ignominious end thrown at a brick wall. It worked just the same after that as it did before, despite being in twenty pieces.

Yet despite Windows and Office being dominant in in the PC world, how long will Microsoft be able to hold on? Under Nadella it has already trimmed down its extensive workforce and more attrition seems inevitable. But while the world may have become compassionate toward Microsoft again, as Assay states, how long will investors and buyers stay loyal?

More importantly, when will Nadella instigate an investigation into his predecessor’s costliest blunders, or will his investors and ex-employees force him to do so?

It seems implausible that any management, let alone one in such a sector-dominant, publicly-listed firm, should get away with such gross incompetency – or was there more to the Elop-Ballmer love story than met the eye?

I vividly remember Elop and Ballmer together on stage at the Mobile World Congress in Barcelona announcing their two companies upcoming marriage with glee. The double act danced around the stage like they were about to conquer the world and, at least in Elop’s case, he had acquired a bank balance to match his overwhelming exuberance.

In luring Stephen Elop from his executive post at Microsoft, Nokia promised to pay him more than $6 million in signing bonuses, according to a regulatory filing. Elop’s annual base salary was €1.05 million euros, or about $1.45 million. He also received 500,000 stock options, 75,000 performance shares and 100,000 more restricted shares.

From ‘burning platform’ to ‘trojan horse’

Of course, this is purely an assumption on my part but it smelt pretty fishy at the time. His ‘burning platform’ analogy alone should have set alarm bells ringing. Then came the incredulous announcement of Nokia’s joint venture with Microsoft, in which the phone-maker exclusively adopted Microsoft’s Windows Phone platform. After all, who in their right mind would have sequestered a deal like that instead of opting for Android, or at least leaving options open, unless there were ulterior motives. There has been much speculation and other conspiracy theories that Elop was a “trojan horse”.

Three years later, after steering Nokia’s acquisition by Microsoft, Elop made his triumphant return to Microsoft as executive vice president (EVP) of the Microsoft Devices Group overseeing an expanded devices business that includes Lumia smartphones and tablets, Nokia mobile phones, Xbox hardware, Surface, Perceptive Pixel products, and accessories. Elop was paid $33.4 million (€24.2 million) in cash and shares after he left Nokia, thanks to rising Nokia share prices, he got more than he was entitled to.

Elop made millions whilst thousands lost jobs

But what about those he sacrificed – the Nokia workforce? The real tragedy lies with them – 7,000 of whom lost their jobs soon after Elop took over in 2010, then the 3,500 made redundant in 2011 and a further 4,000 from its assembly plants in February 2012. Another 10,000 jobs were cut globally in September 2012 after Elop warned that second-quarter losses from Nokia’s mobile phone business would be larger than expected.

Then in July 2014 12,500 posts at Nokia were lost as the Microsoft takeover was completed. Most recently 18,000 lost jobs announced would focus on the Nokia Devices and Services division after Microsoft announced writing down the value of the Nokia deal by $7.6 billion earlier this year.

You would think after all of this that someone would have the balls to investigate, or at the very least, question the whole Ballmer-Elop Nokia fiasco. If not Microsoft itself, perhaps financial regulators in any one of the countries whose workers were so adversely affected or by securities authorities where the deals took place.

That Elop should benefit personally whilst his many thousand employees should be made redundant, and that Microsoft could write off over $7 billion and nobody question it seems bizarre. Am I the only one that feels that something is amiss here?

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