Satya Nadella didn’t take over at Microsoft Corporation (NASDAQ:MSFT) in order to clean up somebody else’s mess, he joined to continue the success of previous executives. He may not have agreed with all of their decisions, but he wasn’t reversing anything in his first days in charge. The company’s earnings report, which arrived on Thursday afternoon, showed success in traditional areas, which Nadella is familiar with. That makes Friday’s events even more puzzling.
According to a statement from the Finnish mobile pioneer, the Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) hardware division is now officially a part of Microsoft Corporation (NASDAQ:MSFT). With Microsoft on the path toward domination of enterprise software and services, it’s difficult to remember why the company bought a mobile phone company in the first place.
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Microsoft gets its hands on Nokia
Microsoft Corporation (NASDAQ:MSFT) finally has its hands on the smart phone maker of its dreams. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V), which Microsoft has been supporting for a couple of years, no longer has a smart phone business. All Microsoft has to do is figure out what to do with one.
The quality of the devices not in question. What is of concern to Microsoft shareholders is the costs of running a failing smart phone maker inside the Microsoft umbrella. Nokia hasn’t made any significant money in the area in years, and Microsoft Corporation (NASDAQ:MSFT) is going to have to spend in order to turn that around.
Yesterday afternoon Microsoft Corporation (NASDAQ:MSFT) showed better than expected earnings on good sales in Windows OEM and Commercial Other segments. The company’s focus is now on enterprise, and its launch of Office for the iPad shows its attempts to push the Surface tablet may be lessened in the next year or two.
Money comes from software at Microsoft Corporation (NASDAQ:MSFT) and not even Apple Inc. (NASDAQ:AAPL) could keep the company’s margin up by delving into hardware. The smart phone business is past its period of major growth, and Microsoft will have to spend a huge amount of money in order to push it to a reasonable slice of the market.
All of this leads to a firm belief that the Microsoft Corporation (NASDAQ:MSFT) acquisition of Nokia doesn’t make much sense, and the company’s shareholders seem to of a similar opinion. The spike in share price resulting from the good returns across the business have been dampened by this morning’s news of new hardware at Redmond.
Spending money on hardware is something that a couple of Microsoft Corporation (NASDAQ:MSFT) executives have come out against and, with his understanding of the business that actually makes money at Microsoft, perhaps Mr. Nadella will have an answer about the place of the Nokia unit soon. Spending money on products that neither earn a profit or ad to the wider Microsoft strategy seems a poor way to use resources.