Elop Isn't the Answer, Microsoft

Microsoft's (NASDAQ: MSFT  ) roughly $7.2 billion deal for Nokia's (NYSE: NOK  ) handset business seems to nudge Stephen Elop closer to the throne at the world's software giant.

It wouldn't be a surprise. Elop was the early favorite in this race by most accounts, long before Microsoft decided to cut another big check this morning.

The allure of Elop is simple. He's a former Microsoft exec. He was the head of its business division -- governing over the still-lucrative Office software franchise -- until being lured away by the challenge of turning Nokia around three years ago. Between his experience at Microsoft and his three years of watching over the company that once ruled the mobile market, Elop would seem to be a sensible choice to lead the tech bellwether into its new age as a devices and services company.

Some are even daring to compare this to Apple's (NASDAQ: AAPL  ) decision to buy NeXT in 1996, a move that returned Steve Jobs to his company. It may be fair to compare Microsoft to Apple now, as this decision all but cements that Windows Phone will be an in-house mobile platform -- because no one is going to want to stray from Android to embrace Windows on smartphones outside of Nokia now -- but this isn't exactly the acqui-hire that brings the prodigal son back in time for a renaissance, like Apple experienced.

Yes, Elop's returning to Microsoft to head up its devices division now. It doesn't mean that he's the guy that can turn Microsoft around. Heck, he couldn't even turn Nokia around. Even after today's pop, the stock is still trading for a little more than half of where it was at when he arrived at Nokia 36 months ago. Some can even rightfully argue that it was Elop's deal to tie Nokia to Windows Phone that doomed the company's handset business. 

Is Elop better than many of the internal candidates that Microsoft is considering? Absolutely. Is he the best choice? Absolutely not. Microsoft needs an outsider, and Elop doesn't count. If the market's going to get excited enough to justify the stock's pop the day that Steve Ballmer announced that he would be stepping down, it's going to have to be a visionary from the outside. 

I realize that many will not share my zeal for Reed Hastings or Sheryl Sandberg as the next Microsoft CEOs, but the market won't be satisfied with an internal promotion for a company that needs a serious attitude adjustment. If Elop is named Ballmer's replacement, it will face the same outcry as Ben Affleck's casting as the new Batman. 

Fans expect more. Investors demand it.

The titans of tech are battling over the future of a trillion-dollar revolution: mobile. Microsoft's purchase is yet another example of how fierce the competition is in this space. To find out which of these tech giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll learn about each company's playbook and get access to our experts' latest thinking about which companies are best positioned to profit. To grab a copy of this report, simply click here -- it's free!


Read/Post Comments (6) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 03, 2013, at 6:23 PM, techy46 wrote:

    Microsoft doesn't need to turn around, they're headed into exactly the right direction. Microsoft doesn't need CEO from a consuemr marketing background. Microsoft needs a CEO with enterprise IT credentials that can manage the execution require to bring those technologies to cloud services for the consuming public. Microsoft has turned the corner with the Nokai purchase now they have to execute the vision of becoming as good at consumer technologies as they are enterprise technologies.

  • Report this Comment On September 03, 2013, at 7:08 PM, 3ni278aosdj8hebj wrote:

    It's impossible to see MSFT going anywhere but up for the next few weeks. They've retired Ballmer, committed themselves to building solid phones for their WP platform, and today they're down over 5%. They'll pick another CEO, probably Elop, and get on with announcing their new vision.

    So my guess is that cashing out of NOK (that bubble has popped) and swapping your profits directly to MSFT would probably be a smart move about right now.

    Personally I'm hoping to make 2% from MSFT tomorrow.

  • Report this Comment On September 03, 2013, at 7:23 PM, Ksvision wrote:

    Elop is visionary. His choice of Windows Android make perfect sense to me. To go in to an established market and trying to carve out a portion is not easy - as you have to differentiate a lot to attract the customers. Initial down fall with WIN was the shortage of APPS. As we all know this growing and all you need is to have good APPS for major uses - not 100K of junk that is not required.

    If only Ballmer had followed up on the WIN8 updates NOK would have done much better. Please wait and see and you will be taking you word back.

    I know a day will come when you will sit back and claim that ELOP was a genius.

    I had this same type of gut feeling when I invested in (i) Chrysler in early 90's after seeing revolutionary designs of their cars, and (ii) AAPL in 2005 when it was less than $40, long before others realized it.

  • Report this Comment On September 04, 2013, at 12:31 AM, tuan2le wrote:

    Is there any Android phone makers other than Samsung shipping more smart phones than Nokia? Nokia could have chosen Android long before Elop arrived. Had Nokia done that, what would be their smart phone market share now? At best probably not better than theirs with the Win smart phones. Would anyone pay Nokia $5 billion for an Android smart phone operations? Would Google subsidize Nokia for producing Android phone - other than a free OS?

    If Microsoft ran an election for next CEO, Elop would be this Nokia shareholder's choice - unless Bill Gates was also a candidate.

  • Report this Comment On September 04, 2013, at 5:43 PM, Skiman1980 wrote:

    Yeah this is just a Microsoft hate article, and its way off. I feel embarassed to read it. Try to be professional

  • Report this Comment On September 05, 2013, at 5:29 AM, qwerty1097 wrote:

    The only way Nokia smartphone division could have stayed with Nokia was if Lumia 928 and 925 models came instead of a decent but lacking 920, that was too big and heavy (not to mention the fake OIS video marketing fiasco), and if Lumia 1020 came out a quarter earlier.

    It could have been worse though - Nokia did an awesome job with Lumia models but the market is very competitive so it was too little and too late.

    Also it might have been enough if WP8 was not moving at a snail's pace - almost makes you wonder if that was intentional from MS side (but I prefer to blame it on incompetence rather than conspiracy).

    So I guess I wouldn't call Elop a success at all - he would have done better by selling the whole division outright instead of the 'burning platform memo' - this $7.2 deal isn't that good at all if you take into account all the investment Nokia spent into moving to Windows Phone in the last couple of years. MS payed more for Skype at that time!

    He wasn't a success for Nokia at all - but Microsoft got all they wanted.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2619378, ~/Articles/ArticleHandler.aspx, 8/20/2014 11:56:26 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement