How Microsoft pulled an HP and almost killed off Nokia

For the last few weeks, Microsoft had been telegraphing an imminent restructure of its phone business. A phone business, which it acquired from Nokia back in 2013. At that time, Microsoft's then CEO, Steve Ballmer, literally had put his neck on the line to acquire Nokia's business, to create a vertically integrated line of Windows Phones, similar to how Apple had succeeded in the smartphone space.

On July 8, Microsoft's current CEO Satya Nadella actually announced what many had in fact feared since Ballmer acquired Nokia's devices division. Microsoft announced that it would write off $7.6 billion from its acquisition of Nokia's devices division and lay off 7,800 people by the end of its fiscal calendar.

Ballmer's exit from Microsoft was partially accelerated due to his insistence on acquiring Nokia's smartphone business and many feared that Microsoft would not be able to scale the business to its former glory.

Nadella, who was then the EVP (executive vice president) of Microsoft's lucrative cloud services division, was also against the deal. When he became the CEO in February 2014, many expected him to change direction and kill off the phone business. But he did not do that.

However, it would seem now that continuous poor performance of the phone division has forced his hand. While neither Microsoft nor he claims to be leaving the phone business, the layoffs and the write-off are being described as a major "restructuring" of the division.

Many people on Twitter don't believe this to be entirely true. Microsoft will most likely focus on specific segments of the market.

However gradually, as the story of Nokia's iconic devices business unravels, parallels can be seen with HP's acquisition of another pioneer of the smartphone industry.

Palm.

HP famously acquired Palm and its innovative WebOS platform. Apart from a couple of smartphones and a beleaguered tablet called the TouchPad that was supposed to compete with Apple's iPad, HP essentially did nothing with the assets. It ended up pawning off WebOS to LG, which now uses the OS for some of its smart TVs.

Nokia's story under Microsoft is similar. When HP acquired Palm, it got its CEO and former Apple executive, Jon Rubinstein (one of the "fathers of the iPod"), to lead the division. He was soon after relieved of his duties. Later, he was found chilling in Mexico.

The same happened with Stephen Elop, who was Nokia's CEO when Microsoft acquired the devices division. Last month, Nadella announced that Elop was leaving the company and his devices division was being fused with the Operating Systems group.

Elop's deputy, Jo Harlow, also announced her departure from Microsoft. This was also palpable as she was the person who spearheaded the deal between Microsoft and Nokia in 2011 for the licensing of Windows Phone.

With the exit of another 7,800 employees from the phone business, now Microsoft barely has any of the Nokia DNA it acquired. Last year, it had laid off around 12,500 people from the Nokia acquisition.

You may see a Lumia 1020 successor later this year. You may see an odd phone here or there, but unless Windows 10 for mobile reaches the mass market appeal of Android, Nokia's iconic phones will go the way of the dodo just like Palm under HP.

You may say company's like Motorola lived to die another day and BlackBerry is still fighting it out, despite fighting for a perceived lost cause. However, there are differences.

Motorola was acquired by Google, the company behind Android and then sold off to the master of the commoditised hardware game - Lenovo.  It is healthy and hearty and making some of the best Android smartphones in the market, which also are rather affordable.

BlackBerry anyway doesn't release the phones at the rate which Microsoft has in the recent past. If rumours are to believed, they, too, are working on an Android smartphone.

It is clear, Microsoft is moving out of the commoditised hardware business, which is a good thing. It may release a flagship Windows Phone and perhaps a low-end product, but that will be just to show the capabilities of its platform like it does with its Surface tablets.

It is already making moves towards making Windows friendlier for phone users and developers alike. It has announced amends to the platform, which will make it easier for developers to port their iOS and Android apps to Windows 10, hence also eliminating the app gap that Windows suffers from. This perhaps is the biggest Achilles' heel of a Windows Phone.

History tells us such moves often don't work, as even BlackBerry made similar overtures in BB10.

Will it work for Microsoft? Only time will tell.