Microsoft (MSFT +0.04%) just announced that it will acquire Nokia's (NOK +2.87%) "Devices and Services" business for a total of 5.44 billion euros (roughly $7.2 billion).
As part of the deal, current Nokia CEO -- and former Microsoft executive -- Stephen Elop is stepping down from his post to become Nokia's EVP of devices and services. He will move to Microsoft when the transaction closes, becoming the head of its devices business unit.
Source: Nokia.
This news makes Elop the clear front-runner to succeed Steve Ballmer, who plans to retire as CEO of Microsoft within the next 12 months. Thanks to his tenure at Nokia, Elop now has experience as the CEO of a major tech firm. Elop is also familiar with multiple aspects of Microsoft's business; he oversaw Microsoft Office during his previous stint at Microsoft and will now be bringing the Nokia mobile business with him. Given Microsoft's plans to become a "devices and services" company, Elop seems like the natural choice to be CEO.
Close collaboration
Ever since Elop left Microsoft to become Nokia's CEO in 2010, he has seemed to be Microsoft's ambassador to Nokia more than a fully independent chief executive. His mandate was to stem the bleeding in Nokia's mobile business. Elop quickly took action, and opted to bet the farm on Microsoft's new Windows Phone platform.
The decision to dump Nokia's legacy Symbian OS was definitely the right choice. Symbian simply wasn't built to keep up with the new competition: Apple's iOS and Google's Android OS. Still, picking Windows Phone as Nokia's exclusive smartphone platform was an unorthodox move. After all, Android was available as a free alternative and already had captured a big chunk of the market.
Elop has continued to tighten the bond between Nokia and Microsoft. While other vendors like Samsung have introduced smartphones on the Windows Phone platform, Nokia has remained the dominant Windows Phone vendor, with a more-than-80% share. Moreover, Elop apparently continues to believe that Windows Phone will emerge as a global "third platform" against Android and iOS.
Meeting of the minds
There seems to be a clear meeting of the minds between Microsoft's board and Elop. Both have signaled a strong commitment to the Windows Phone platform despite limited success thus far: Windows Phone held just 3.7% of the global smartphone market last quarter.
Moreover, Microsoft's acquisition of the Nokia mobile phone division backs up the company's verbal commitment to becoming a "devices and services" company. As head of the devices side of the business, Elop has an inside track to the CEO seat. Since he led the business division during his previous stint at Microsoft, Elop has plenty of experience on the services side, too.
Microsoft's focus on becoming a devices-and-services company may be a strategic misstep. The company might be better off doubling down on its business focus, as one prominent activist investor has urged. However, that ship has sailed; the Nokia acquisition will push Microsoft head-first into the device market. Elop's position at the center of that shift makes him the top candidate to become Microsoft's third CEO.
