Microsoft's not going to buy Nokia

Latest rumor has Redmond offering $19 billion for Finnish company's mobile phone business

Credit: Photo credit: REUTERS/Luke MacGregor

A Russian journalist who keeps getting called a mobile phone "industry insider" by everyone caused an Internet stir on Wednesday after tweeting that Microsoft has agreed to purchase Nokia's mobile-phone business for $19 billion.

OK, I'll play to the extent that I'll blog about it, but I'm not buying it.

(Also see: Nokia shares hit 13-year low on Q2 warning)

Here are the "facts": Eldar Murtazin, who is editor in chief of the popular, late Tuesday tweeted:

One small software company decided last week that they could spent 19 bln USD to buy a part of small phone vendor. Thats it.

And because of that one tweet, the Twitterverse and blogosphere are going nuts. Well, also because Murtazin broke the story about Nokia's partnership with Microsoft announced on Feb. 11. He does have that going for him.

Murtazin initially floated this rumor a couple of weeks ago, maintaining in his personal blog that "the deal could be closed before the end of 2011, both companies are very much in a hurry."

Much is made of the fact elsewhere that current Nokia chief executive Stephen Elop is a Microsoft veteran, as if he was placed inside Nokia as some kind of "Manchurian candidate" tasked with preparing Nokia for a takeover.

That strikes me as far-fetched. I suspect Elop took the top spot at Nokia last fall without quite grasping how serious the company's competitive position had disintegrated. (I'd say the same about Carol Bartz at Yahoo and Leo Apotheker at HP.) It took him a few short months to get a clear picture, after which he pushed the panic button with his "burning platform" memo.

By then Elop already had been negotiating a partnership with Microsoft to manufacture smartphones running Windows Phone 7. The "burning platform" memo was his way to prepare Nokia's employees, investors and the Finnish public to accept the previously unthinkable -- that Nokia, the world's largest cellphone maker, had fallen so far behind in smartphone development that it needed to be bailed out by another (non-Finnish) corporation. Microsoft, no less!

But Nokia's attractive price aside, I don't see how Microsoft gains from buying it outright. Redmond already has what it wants out of the deal -- a large manufacturer that will crank out WP7 phones. It doesn't need to spend $19 billion more to get that.

Further, what Microsoft currently lacks in control by having a "partnership" with Nokia, it more than gains in flexibility. Don't forget that Microsoft just last month cut a deal with Research in Motion to include some of its software, such as the Bing search engine, in RIM's mobile devices. Until Redmond thinks it sees a winning play in mobile, it will continue to hedge its bets.

And if it turns out that Microsoft does buy Nokia's mobile-phone business for $19 billion, I will blog about why it will end in disaster, much as the partnership is destined to.

Or maybe just delete this post.

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