Over at Forbes today, innovation expert Gerard J. Tellis takes a look at the Microsoft Corporation (NASDAQ:MSFT)’s acquisition of Nokia Corporation hardware concerns and comes to a stark conclusion. Microsoft is killing innovation at home by following the market, rather than building its own.

Microsoft

According to Tellis, the Microsoft Corporation acquisition of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s handset business mirrors the moves of Hewlett-Packard Company (NYSE:HPQ) and Eastman Kodak Company (OTCMKTS:EKDKQ) when they were being killed by businesses they had an advantage in from the start. The market has sent shares in Microsoft Corporation (NASDAQ:MSFT) down around 7% since the deal was announced, indicating it agrees with Tellis.

Innovation and Microsoft

According to Tellis, innovation at a large company is often overlooked because management is far too concerned with traditional business. When that traditional business becomes industry standard, the company flails in an attempt to catch up. The Nokia acquisition looks like Microsoft Corporation (NASDAQ:MSFT) is flailing according to the analysis.

Microsoft Corporation (NASDAQ:MSFT) is a company full of talent. It has a thriving business, and it’s incredibly cash rich. Watching management blow $7 billion on a hardware business set to lose more money every year has not been easy for investors, and many of them have bowed out because of it.

“Microsoft now suffers from what we call the incumbent’s curse: It fears cannibalizing cash cows, it focuses on the present over the future, and it is risk-averse,” says Mr. Tellis. It can’t look to the future because it’s worried what it might do to present business. That restriction allowed the future to catch up to Microsoft Corporation (NASDAQ:MSFT), and it’s flailing to get back in the game.

Microsoft enterprise

Many investors have been pointing to the traditional business of Microsoft Corporation (NASDAQ:MSFT), enterprise software, as the most likely earner in the future, but Microsoft is insistent on grabbing as much of the mobile business as it can. After 18 months of a real push in the sector ti has little to show but massive losses.

Meanwhile, the enterprise software and services market is still young and Microsoft Corporation (NASDAQ:MSFT) is a trusted name in the industry. There’s plenty of room for growth and, more than likely, plenty of innovative solutions being developed t Microsoft. Microsoft is ignoring them in order to lose money building phones.

Meanwhile Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) shares are still spiking after it rid itself of the burdensome hardware business. There was a winner in that deal, and it was not the Microsoft shareholder.