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SEATTLE — With its purchase of Nokia’s phone business, Microsoft is
taking inspiration from Apple’s way of making products, bringing
hardware and software under a single roof where they can be more
elegantly woven together.
Multimedia
But Microsoft already bears a striking resemblance to Apple — the Apple
of two decades ago, not the trailblazer of the mobile era. The $7.2
billion Nokia deal, which was reached late Monday, is unlikely to change
that and catapult Microsoft up the ranks in the smartphone market.
That is because Microsoft, with its Windows phone operating system, is
stuck in third place in that market, where all the oxygen has been
drained by more established players.
Apple and Google have won the hearts and minds of developers, who design
the apps that lure consumers to their devices, while Samsung is the
dominant maker of mobile phones, most of which run Google’s Android
operating system. Even though Microsoft’s and Nokia’s products have won
praise for their quality, they have arrived late.
“What matters is not the phone per se but a dynamic app and services
ecosystem,” said Brad Silverberg, a former senior Microsoft executive
who is now a venture capitalist in the Seattle area.
Microsoft’s predicament is a flashback to the situation Apple found
itself in during the early 1990s. At that time, Apple arguably had a
superior computer product, the Macintosh, but it languished as PCs
running Microsoft’s Windows operating system engulfed most of the
market. One of the biggest problems for Apple then was that Microsoft
had succeeded in gaining the allegiance of software developers, who
produced a bounty of applications.
“They’re stuck in the same vicious cycle that Apple was in 20 years
ago,” said Benedict Evans, an analyst with Enders Analysis, a research
firm, and a former strategist in the wireless industry.
The challenges for the marriage of Nokia and Microsoft go far beyond
support from developers. Microsoft is in the midst of the biggest
organizational changes in its 38-year history. In mid-July, Steven A.
Ballmer, Microsoft’s chief executive, unveiled a plan to restructure the
company’s often clashing fiefs into business groups intended to
cooperate more.
While the new organization seemed to set up Mr. Ballmer as the maestro
in charge of keeping the various groups in harmony, he stunned the tech
industry late last month by announcing his plans to retire
from Microsoft within 12 months. Mr. Ballmer said he was leaving
earlier than planned because he felt the company needed a leader
prepared to stay longer. That fueled speculation that Mr. Ballmer had
been encouraged to leave by Microsoft’s board.
Blending a major acquisition into a company is challenging enough in
times of calm. Doing so with the unexpected management change at
Microsoft could make it even harder, tech industry executives and
analysts said.
“The issue I wonder about is the amount of complexity Microsoft is
taking on its business by absorbing Nokia at the same time it is
reorganizing at the same time Windows 8 is faltering,” said Michael
Mace, a former executive at Palm and Apple who now runs an app
development company in Silicon Valley, Zekira. “It’s scary from that
standpoint.”
While Mr. Ballmer plans to leave Microsoft after a successor is found,
he was very much involved in cutting the Nokia deal. Over the last
several months, Mr. Ballmer and his deputies met in places like Redmond,
Wash., London and Helsinki with counterparts in the talks, led by Risto
Siilasmaa, Nokia’s chairman. The style of Mr. Ballmer, an exuberant
leader with a booming voice, was a stark contrast to the reserved,
gentlemanly manner of Mr. Siilasmaa, according to a person present
during many of the meetings.
Microsoft is under enormous pressure to reinvent itself for a world
where mobile devices are the animating force in technology, rather than
personal computers. Sales of PCs are suffering the most prolonged
decline in their history. Two powerful pistons of Microsoft’s business —
Windows and the Office suite of applications — are tied to closely to
the health of the PC market.
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