In 2014, Microsoft’s acquisition of Nokia’s struggling phone business for $7.2 billion was considered one of the biggest acquisitions in technology history. The deal was expected to help Microsoft gain a foothold in the rapidly growing smartphone market dominated by Apple’s iOS and Google’s Android. However, it turned out to be a colossal failure and a huge loss for Microsoft.
Nokia, once a giant in the mobile phone industry, couldn’t keep up with its Silicon Valley rivals around 2010. The Finnish company was slow to get into the smartphone game. Its outdated Symbian operating system couldn’t compete with the slick iOS and Android software on iPhones and the latest Android devices. Furthermore, Symbian was also a difficult operating system to code.
In an attempt to recover, Nokia’s board replaced the Finnish CEO with Stephen Elop, a former Microsoft employee. Elop abandoned Symbian and bet Nokia’s future on Microsoft’s Windows Phone platform. However, Windows Phone was widely criticized as a lackluster operating system that didn’t bring much profit to developers.
In 2013, Microsoft decided to buy Nokia’s entire handset business and granted Nokia’s remaining division many patents. The acquisition gave Nokia a huge cash injection, but Microsoft was seen as overpaying for an asset that was quickly becoming obsolete.
The acquisition brought Elop back to Microsoft as the new head of the devices division. However, he didn’t last long after Satya Nadella replaced Steve Ballmer as Microsoft CEO in 2014. Nadella realized the mobile strategy was a failure and quickly set out to end it. By July 2015, Nadella announced that Microsoft was suffering a staggering loss of $7.6 billion in its acquisition of Nokia and decided to lay off 7,800 workers, mainly in the phone hardware department.
Microsoft has now shifted its focus to being more cloud-focused under the leadership of Satya Nadella. However, the incident with Nokia is still seen as a reminder that even giants can collapse when they cannot keep up with tectonic changes in technology.