Should Microsoft Buy Nokia? Bad Idea, Say Analysts

Computerworld — Nokia's announcement Thursday that it plans to cut 10,000 jobs in coming months resurrected speculation that Microsoft should buy the cell phone maker in order to prop up its struggling Windows Phone platform.

Slideshow: Tech Partnerships: Hits, Misses and Too Soon to Tell
Slideshow: Match Made in Hell: 7 Worst Tech Mergers and Acquisitions

Several industry analysts said even with a likely lower purchase price for Nokia, as its stock price has declined over the past year, it would be a bad idea to buy the Espoo, Finland-based phone maker.

"Microsoft would be foolish to buy Nokia, plain and simple," said Jack Gold, an analyst at J. Gold Associates. "This idea of Microsoft buying Nokia comes up each time Nokia has a bad quarter, and some financial analysts think it's a good idea -- no doubt to pump up the Nokia stock a bit."

Gold added, "There really is no advantage to Microsoft owning a device hardware company."

"A software company running a hardware company almost never works out," because of cultural differences between the two work groups, added Rob Enderle, an analyst at Enderle Group.

Analysts also noted that Microsoft needs to work with several hardware vendors to build Windows Phones, and wouldn't want to be seen as exclusive to Nokia by purchasing it, especially with the Windows Phone 8 operating system on the way.

Google recently acquired Motorola Mobility, which makes Android phones, but analysts are watching that purchase closely to see how Google manages its relationships with other Android hardware makers, especially Samsung, the global Android leader.

"We'll see how the purchase goes with Google and Motorola, but I'm doubting that will work out," Enderle said.

The biggest reason it is difficult for software and hardware companies to work together is because of cultural differences and work styles of hardware engineers compared to software engineers, Enderle said. Microsoft bought both WebTV and Danger, maker of the Sidekick, and both ventures failed, he said.

"If you add the size of Nokia, the physical distance from Redmond [home of Microsoft in Washington state], and the cultural differences, it would be incredibly difficult to do this and not destroy Nokia in the process," Enderle said.

Instead of buying Nokia, analysts agree that Microsoft needs to continue to work closely with the cell phone maker. "Microsoft and Nokia need to drive the Windows Phone OS forward as fast as possible, and Microsoft needs to believe that the phone is a crucial element to the success of their ecosystem going forward," said Carolina Milanesi, an analyst at Gartner.

Continue Reading