Microsoft's 14-month rent of former Nokia CEO Stephen Elop cost the firm at least $18 million, or about $1.3 million each month.
Elop was ousted from Microsoft Wednesday after a reorganization of the company eliminated his Devices division by folding it into the same group responsible for Windows. Terry Myerson, who led the OS division, will head the combined Windows and Devices Group (WDG).
The $18 million was Microsoft's part of Elop's Nokia exit package when Microsoft's $7.9 billion purchase of most of the Finnish firm's phone assets finalized in late April 2014. Under the terms of his contract with Nokia, he was entitled to 18 months of his base salary, his cash bonus, and accelerated vesting of his outstanding equity awards. The total: About $25.4 million at the September 2013 date of a Nokia filing with the U.S. Securities and Exchange Commission (SEC).
Under the agreement between Microsoft and Nokia, the former was to pay 70% of the total, the latter the remaining 30%.
Nokia also waived the non-compete clause in Elop's contract for employment at Microsoft.
The $18 million owed Elop by Microsoft -- 70% of the $25.4 million total -- would not include salary paid to him during his 14-month stretch at the U.S. company, nor any stock awards that vested during that period or afterward. Microsoft did not label Elop as one of the five top executives for whom it was required to report compensation to the SEC, so his salary, bonuses and other income have not been made public.
Elop, 51, previously worked for Microsoft between 2008 and 2010, when he was in charge of the then-named Business Division and responsible for, among other products, Office. Nokia hired Elop in September 2010, paying him a $6 million signing bonus.
Nokia's acquisition, and the return of Elop to Microsoft, was engineered by former CEO Steve Ballmer, who pushed for the purchase as his last major move as chief executive. Ballmer had announced his impending retirement the month before the Nokia deal went public.
Elop was one of three top Microsoft executives let go after current CEO Satya Nadella's first corporate reorganization Wednesday. The others were Kirill Tatarinov, who ran the team responsible for Dynamics, Microsoft's customer relationship management (CRM) and enterprise resource planning (ERP) software; and Eric Rudder, vice president of advanced technology and education.
"With the structural change described above, Stephen and I have agreed that now is the right time for him to retire from Microsoft," Nadella said in an email to employees Wednesday.
The money paid to Elop, although significant on a personal level, will likely be a pittance of what Microsoft writes off, perhaps next month, for the Nokia acquisition, which has failed to parley into a return on the investment.
In an April filing with the SEC, Microsoft signaled that it may take a massive write-off of the Nokia deal.
"Given its recent performance, the Phone Hardware reporting unit is at an elevated risk of impairment," Microsoft said in the filing, using a term to describe the situation when the market value of a business is less than what's carried on the books. In such scenarios, corporations are required to balance accounts by taking a charge against earnings to the tune of the difference.
Microsoft currently carries $5.46 billion in "goodwill" from the Nokia acquisition on its books, as well as another $4.51 billion in intangible assets. The Redmond, Wash. company had attributed the Nokia goodwill to "increased synergies that are expected to be achieved from the integration of NDS [Nokia Corp.'s Devices and Services business]."
That value may now be greatly overstated, Microsoft acknowledged.
Microsoft does its impairment calculations annually at the beginning of May. If it wrote down part or all of the $5.46 billion in goodwill related to the Nokia acquisition, it would do so in the current quarter, which ends June 30, and probably announce it in July, either at or before its next scheduled earnings call with Wall Street.
This story, "Microsoft rented Elop for 14 months at $1.3M per month" was originally published by Computerworld.