When Microsoft’s then CEO Steve Ballmer proposed buying Nokia to shore up the company’s foundering mobile phone division, Satya Nadella thought it would be a mistake.
Four years later, he hasn’t changed his mind.
In his new book, “Hit Refresh,” Nadella, who replaced Ballmer as Microsoft CEO, says he unsuccessfully tried to dissuade his predecessor from purchasing Nokia.
According to the book, Ballmer held an informal poll among his most senior executives: Should he move ahead with an acquisition of Nokia? Ballmer made the case that without Nokia, Microsoft’s struggling Windows Phone operating system and ecosystem would never be able to compete with Apple’s iPhone and Google’s Android, which were dominating even then.
Nadella, who was then the top executive in charge of Microsoft’s cloud business and a member of Ballmer’s inner council, voted “no.”
“[It] was too late to regain the ground we had lost. We were chasing our competitors’ taillights,” Nadella writes in his book.
Nadella’s “no” vote was first reported by Bloomberg back in 2014, not long after he assumed the role of chief executive, but he’s never before publicly acknowledged it. Other Microsoft executives joined Nadella in opposing the deal, according to the report, while Microsoft founder Bill Gates advised Ballmer against it.
Ultimately, Ballmer got his way. Microsoft purchased Nokia in 2013 for $7.9 billion. But just as Nadella worried, the deal turned out to be a big mistake. The company ultimately took a write-down for almost the entire purchase price and laid off thousands.
And there was another outgrowth of the deal – Ballmer’s departure. Microsoft finalized the deal about a month after Ballmer said he would step down as CEO. The friction between Ballmer and Microsoft’s board of directors that was generated by the Nokia acquisition is ultimately what led to his decision to resign, according to numerous reports.
- Getty Images/Andrew Burton
In early 2014, Microsoft appointed Nadella CEO. While Microsoft released one new flagship Windows phone, the Lumia 950, it wasn’t long before Nadella started to unwind the company’s smartphone business.
Instead of focusing on making its own phones, Microsoft, under Nadella, has concentrated on making apps and services available for Apple’s iPhone and iPad and for Android devices. Microsoft should only be in mobile when it has something unique to offer, Nadella writes in his book. That could be a hint that the company is still working on its long-rumored Surface Phone.
Nadella says his biggest disappointment from the entire Nokia episode was its human cost.
“In retrospect, what I regret most is the impact these layoffs had on very talented, passionate people in our phone division,” Nadella writes.