Microsoft’s landmark decision to buy Nokia’s handset business for $7.2 billion will put Stephen Elop back into business working at the company where he was before he became CEO of Nokia — he’s now the Microsoft’s EVP for devices and services. As it turns out, this could end up being just stage one of Elop’s ascendancy at Redmond. Steve Ballmer, the outgoing CEO of Microsoft, has confirmed that Elop is definitely a prospect for the top job. In comments made to the Seattle Times, Ballmer notes that “Stephen will go from external [candidate] to internal” as part of the board’s wider search.
Before moving to Nokia, Elop headed up Microsoft’s business services division, and when he joined Nokia many accused him of being a Trojan horse – representing the first wave of Microsoft’s bigger plan to take over Nokia. That image became sharper when Nokia subsequently abandoned Symbian and chose Windows Phone as the platform for its smartphones, tying that in with a deep partnership that involved financial between the two companies. And it was colored in more by the revelation that in fact Elop’s wife and kids never actually left Redmond when he took the job in Finland.
20-20 hindsight, huh?
Now that picture transforms once again. You could argue that the Trojan horse is now being wheeled through Microsoft’s gates.
As Microsoft pointed out some months ago when it announced a major reorganization, hardware would complement, and be as significant as, the software operations that have up to now been the bedrock of Microsoft. While the company has made other advances in this regard — yes! I mean the Surface! but also in its Xbox division — you could argue that the deal to take on Nokia’s handset business, and the tens of thousands of employess who work for it, its very biggest move yet in that direction. By association, Elop’s role in leading that business makes him possibly one of the strongest candidates yet for who might be best positioned to take Microsoft into its next phase of life.
Interestingly, when Microsoft and Nokia agreed to some early interviews after the news was first announced (in the dead of night in London where I live — not cool, guys), more than one journalist remarked on how the “joint interviews” they were given with Ballmer and Elop were in fact all-Ballmer shows.
Elop, however, did finally speak up this morning at Nokia’s press conference, which was, in a way, classically Nokia — delivering “news” that was in fact already press released hours before, something you could parallel with how Nokia itself has been late to the game with much bigger things, like smartphones.
But in it there were a few nuggets of detail from Elop. In a way, considering Ballmer’s admission of Elop’s candidacy, you can read them like a live audition, or stump speech, for what Elop could bring to the table as Microsoft CEO.
“In the last few years we’ve made a series of difficult decisions,” he told the assembled audience, full of Nokia employees, as he recounted the “narrow restructuring” at networking and infrastructure division NSN, the establishing of the HERE location unit, and the honing of its patent portfolio, on top of all the work they’ve done in devices. “The decisions we made there is no doubt that they will improve our position and our security going forward.”
But the comments were peppered also with more than one mea culpa. “I share the frustration of being far behind two strong competitors,” Elop said later. “I feel sadness because we are changing Nokia and what it stands for. And for all of us… there is ambiguity and concern because it is so hard to know what the future holds. But we have to do the right thing.”
On a more positive note, he also emphasized how he helped speed up the pace of change at the company — another asset that will be essential for Microsoft as a whole. “We have been building momentum… going faster than Nokia has ever done before. As others have gone sideways our goal of achieving the third ecosystem has become a reality.”
And he also emphasized how Nokia’s cash position was such that it was in no place to convert its third ecosystem position into any kind of decent market share. Gartner notes that today, Nokia’s No. 3 smartphone position — and now Microsoft’s — translates to only 3 percent, a stunning drop over the last seven years:
“We need financial muscle to truly break through with consumers,” Elop insisted. That muscle cannot come from Nokia because it doesn’t have the money. Microsoft does — to the tune of total cash, cash equivalents and short-term investments standing at $77.02 billion as of June 30.
The transaction has yet to get regulatory and shareholder approval, but Elop is already pitching the idea of how Nokia will fit into a more vertically integrated, larger Microsoft that will use handsets as another way of selling its wider portfolio of Microsoft services to consumers (in other words, more big-picture strategic stuff about the larger company): “This provides greater opportunities for our employees and for the future,” he noted, adding that “this helps us increase share through unified marketing.”
Perhaps most of all, the feeling I got watching him speak today is that Elop is positioning himself not just as the continuing head of that devices business as it makes its transition into a bigger organization, but also for a business where he himself may be thinking about more than just those yellow phones: “As the leader of Nokia for the last three years there is no question I feel a strong sense of responsibility and will continue to lead the transaction now and beyond.”