Microsoft Corporation (NASDAQ:MSFT) agreed to buy the Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) smartphone business for just over $7 billion last weekend, but the deal has cost the company much more than that. The company’s market share fell by about $18 billion from the end of the sale through yesterday’s close.

Microsoft nokia

What has gone wrong at Microsoft Corporation (NASDAQ:MSFT)? A deal that saw the company take on board $7 billion of assets should not have caused an $18 billion drop in value. The answer lies in the direction of the company’s CEO Steve Ballmer, and the strange case of his departure.

Why did Ballmer leave Microsoft?

When Steve Ballmer announced that he would step down as the CEO of the company in the next year, the company’s shares spiked. Investors were sure that Microsoft was set to change course, and focus on its high margin enterprise business while leaving its days of trying to please consumers behind it. When the company announced the purchase of the Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) smartphone business, those illusions were shattered.

The most likely successor to Ballmer right now appears to be Steven Elop, the CEO of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) and a former executive at Microsoft Corporation (NASDAQ:MSFT). Elop has been consumer- focused for all of his recent career, attempting to turn Nokia into the consumer electronics company it was a decade ago.

Investors are not excited about Elop following in Ballmer’s footsteps and attempting to turn Microsoft Corporation (NASDAQ:MSFT) into the consumer electronics giant it never has been. Assuming the deal goes through Microsoft could be losing more than $1 billion every year from tablet and smartphone hardware, and that is before considering the cost of the software development to the company.

Is Microsoft really looking that bad?

Microsoft Corporation (NASDAQ:MSFT) shares are currently trading at around 12 times last years earnings. Earnings are expected to rise by close to 4 percent this year and and more than 8 percent the year after. The company’s stock is certainly not looking overvalued, at least not compared to some of the tech companies out there.

The problem for Microsoft Corporation (NASDAQ:MSFT) is that investors don’t think it can win over consumers. Even if it does, it won’t hit the same margins that Apple Inc. (NASDAQ:AAPL) made its name off of. The Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) and the presumed continuation of consumer led strategy is not the most profitable one the company could be following, according to some loud voices.