After losing $2.5 billion on misbegotten online ventures last year, Microsoft is poised to give billions more to Nokia, as inducements for Nokia to go with Microsoft instead of the free Google Android software that it had been considering. According to the Wall Street Journal,
“Microsoft agreed to pay Nokia billions of dollars over the course of their multiyear agreement to help Nokia market and develop Windows Phone devices, according to Mr. Elop. It is unclear how much Google may have offered Nokia.
Incidentally, Nokia Chief Executive Stephen Elop used to work for Mr. Ballmer.
Intel Corp. CEO Paul Otellini said Mr. Elop went with the highest bidder. “Between Microsoft and Google he was getting incredible offers, money, to switch,” Mr. Otellini told investors Thursday. Microsoft bid more, he said.”
According to the same article, “[While] Windows Phone has gotten positive reviews since the first handsets came out with it last November, the software hasn’t made a dent in the mobile market. Microsoft software ran on only 3.1% of smartphones shipped in the fourth quarter, compared with 32.9% for Google and 30.6% for Nokia, according to research firm Canalys.”
The market reacted to this news as you might expect. Nokia’s stock dropped from $11.50 to $9 , continuing a long slide from a peak of $60, as the market concluded that Nokia’s phones will become irrelevant. Microsoft’s stock dropped from $27.37 to $26.91 to account for its giveaway. The market likely already values Microsoft’s phone business at zero. With 8,570 billion shares outstanding, a drop of $.46 a share reflects a drop in market capitalization of $4 billion.
And Google? Its stock jumped from 620.28 – 627.25 in the same period, reflecting approval of its handling of the situation and continued strength in its businesses.
Who says market prices are a random walk?
And he was wrong.
I’ve said it before and I’ll say it again. Waste a billion here, a billion there, and pretty soon you’re talking about real money, a thought attributed to Sen. Everett Dirksen (1896 – 1969).
Taking a leaf from the White House, perhaps, Mr. Ballmer proposes to spend Microsoft’s way out of its current funk, by giving away its cash.
The results will likely echo the Federal Deficit, which increased by $3 trillion so far under President Obama’s watch.