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Drainage! Drainage, Eli, you boy. Drained dry. I'm so sorry. Here, if you have a milkshake, and I have a milkshake, and I have a straw. There it is. That's a straw, you see? You watching? And my straw reaches across the room, and starts to drink your milkshake. I drink your milkshake! I drink it up.
-- Daniel Plainview in There Will Be Blood
When Microsoft (Nasdaq: MSFT ) looks in the mirror, does it see Daniel Plainview?
You may not remember the ruthless oilman that Daniel Day-Lewis played to Oscar-winning perfection in 2007's There Will Be Blood. Plainview won't stop at anything to get what he wants, and he feasts on those weaker than him who stand in his way.
The famous "drink your milkshake" scene comes toward the end of the film, when Plainview gets his adversary, Eli Sunday, to embarrass himself by admitting to being a false prophet, and then proceeds to club Sunday to death.
"I'm finished," Plainview belts out.
Is Eli really Nokia (NYSE: NOK ) CEO Stephen Elop? Is "I'm Finnish" a more fitting closing shot in this case?
All I know is that Microsoft has once again tricked a weak-kneed giant into making it stronger.
Elop doesn't see it that way. After watching the world's largest handset maker take a hit on Friday, the head-scratching CEO took to the press to clarify that his company will be paid billions in yielding to Windows Phone 7 as a smartphone platform and Bing as the default search engine.
"The value transferred to Nokia is measured in B's not M's," Elop said over the weekend. "This is something I don't think was completely explained."
It didn't matter. The stock got slammed yesterday, too. Nokia has shed 20% of its value in two trading days. It has shed roughly $9 billion in that time.
Dare I say it? The value transferred out of Nokia is measured in B's, not M's.
Now it should be pointed out that the market doesn't necessarily believe that Nokia's pain will be Microsoft's gain. Shares of the world's largest software company have also closed lower the past two trading days. Mr. Softy's market cap has been shaved by $2 billion in that time.
In short, this deal has destroyed $11 billion in value. The S&P 500 has actually managed to inch higher on Friday and Monday, so we can pin the shortfall entirely on this case of milkshake slurping.
What did Elop think would happen? A week ago, he was being applauded for his blunt assessment of his company's predicament.
"We poured gasoline on our own burning platform," he said. Now he's made matters worse by backing up a diesel tanker over the inferno.
Drainage, you boy
Elop's folly is that he misunderstood what his shareholders wanted. They never wanted Microsoft's billions, at least in exchange for a pointless surrender. Nokia is sitting on a stash of $9.4 in net cash and other liquid assets. Nokia needs the growth catalysts more than the money.
Investors would have settled for a buyout. The last thing they expected was a sellout.
It's not as if there was ever going to much of a future for its Symbian mobile operating system or even the MeeGo platfrom it was championing alongside Intel (Nasdaq: INTC ) . However, at least there was always a chance that Nokia could catch fire on either end and reverse its trend of gradual market share erosion.
Now it's simply another Microsoft mercenary. It's a gig that doesn't pay. Just ask Yahoo! (Nasdaq: YHOO ) .
Put a Bing on it
Yahoo! closed at $17.22 on Jul. 28, 2009. It then announced the next morning that it would be outsourcing its search through Microsoft's Bing. Yahoo! shares tanked 12% on the news. Like Elop, Yahoo! CEO Carol Bartz tried to emphasize that it would be on the receiving end of a lot of Microsoft money with little overhead on its part.
It didn't matter. Yahoo!'s shares continued to tumble.
Yahoo! is in a much better place than Nokia. It still has a thriving display advertising business. The Microsoft arrangement has assisted in Yahoo!'s marginwidening explosion on the bottom line. There's an attractive portfolio of Asian investments resting pretty with the Yahooligans. Investors don't seem to care, though. The market's been rallying over the past two years, but Yahoo! still closed last night just short of the $17.22 mark it was at before going public with its Microsoft-ian handshake.
Phoning it in
One can always argue that Nokia would have shed more than $9 billion over time by simply staying the course. It just ripped the Band-Aid off quickly, opting against an anguishing slow peel.
I don't buy it. Nokia was never going to catch up with Apple's (Nasdaq: AAPL ) iOS on the high-end or Google's (Nasdaq: GOOG ) Android everywhere else, but taking gobs of money to champion Microsoft's fledgling platform isn't the answer. It's really more of a question.
Why did you do it, Elop? The accusations are already starting to creep up. As a former Microsoft executive, he's been called a Trojan horse. If the stock doesn't bounce back -- and soon -- Elop's tenure at Nokia will be short. It won't be a slow peel, either.
What could Nokia had done? It obviously had to do something. The company saw sales edge up just 4% last year while market share plummeted. However, this is also a company with plenty of money in the bank. It should have been a buyer to bump up its organic malaise. It certainly didn't have to be a seller.
Instead of coming off as an opportunist, Nokia is now seen as a once talented prizefighter that just took money to throw the fight. The only difference is that it did it legally and in plain view -- with Plainview.
Do you think Nokia will bounce back? Share your thoughts in the comment box below.