Microsoft buys Nokia Devices and Services, Elop is EVP of Devices

Microsoft has announced that it will be buying Nokia’s devices and services business a various patents for $7.17 billion, and that CEO Stephen Elop (shown at right)  is rejoining Microsoft as head of Microsoft Devices. (I presume that means that Julie Larson-Green, recently moved to EVP of Devices and Studios in the recent reorg, will now be head only of Studios, which means Xbox and related game software.)

This is the other shoe falling. When Ballmer announced he was leaving Microsoft sometime in the next 12 months, and that the board was already evaluating candidates to replace him, Stephen Elop’s name was on many lists, since he was head of Microsoft Business division when he left the company in September 2010. And he now EVP of Devices, in charge of phones and tablets. Stephen Elop is definitely the frontrunner in the Microsoft that Ballmer has decided to double down on, which is a devices and services business, making Windows Phones and Surface tablets. And why not give the keys to Elop, who has built arguably the best Microsoft Windows phones.

But as I wrote recently (see Microsoft’s Ballmer stepping down in next 12 months), this is just going to be a continued slide as Microsoft throws billions more onto Ballmer’s funeral pyre. I can understand why Nokia stock would rise on this news, but if I were a Microsoft shareholder I would be selling.

Microsoft and Nokia joining up may turn out like two tired swimmers grabbing each other and sinking.

The Microsoft argument is that the company will be much strengthened working together with Nokia. If so, then why not a year ago when he walked away from a rumored deal? Because at that time Ballmer thought he could build his own devices and sell a lot of them. Instead, he wrote off $900 million in Surface tablets at the end of the last quarter (see Microsoft sees worst stock drop since 2000: Welcome to the post-PC era), and the board (and especially Bill Gates) decided it was time for someone new at the helm of Microsoft. But it seems like the board still believes in the services and devices plan, which is to invest hard and win big in the devices marketplace.

I think this is a huge pipe dream. Nokia has leaked new Microsoft RT-based tablet plans based on Nokia Lumia phone designs, and my hunch is that they believe this is a better table that Surface, just like Lumia is a better phone that anything Microsoft has built. The rumors are that this tablet would be launched in late September.

All along, as the Microsoft disaster has been careening down the hill, I have stated that the future will be in enterprise software: that Microsoft has to find a Sam Palmisano type to turn the company around and drop all the money-losing lines of business, like Bing, phones and tablets. But I also have continued to bet that the company wouldn’t do so until a/ Ballmer was gone, and b/ billions more were squandered. Well, they are an additional $7.17 billion down, and counting.

The big question is whether Ballmer is now going to hand the reins to Elop, and if so, will Elop ride the Microsoft trail as Ballmer has laid it out, right over a cliff? It might be that Ballmer and the board (including Bill Gates) are prepared to spend more time and money in capturing a significant share in the handset and tablet world, even though iOS and Android seem to have closed that opportunity. It might be time to start handicapping who will be CEO at Microsoft once Elop takes his shot, and fails with the Ballmer plan, just like Ballmer did.

Don’t hold your breath for that Nokia tablet

Stephen Elop wants to see how tablet platforms mature, and what value Nokia can add, before he dives in. With Windows RT/8 and Android as his options, we can expect quite a wait.