Many thanks to Ben Walsh for pulling together the data for this chart. The numbers speak for themselves, really: over the course of Steve Ballmer’s tenure as Microsoft CEO, the company’s stock price has gone nowhere, its market share has plunged—but its headcount has more than trebled. And that’s before adding another 32,000 employees as part of the Nokia acquisition.
Ben Thompson has a very smart analysis of Microsoft’s move here:
“Guy English has already characterised Ballmer’s disastrous reorganisation as a straitjacket for the next CEO; adding on a mobile phone business that Microsoft probably should abandon is like attaching an anchor to said straitjacket and tossing the patient into the ocean. It will be that much more difficult for the next CEO to look at Windows Phone rationally.”
As Henry Blodget notes, Windows Phone is now going to account for a good quarter of Microsoft’s employees; integrating those two huge and very different cultures is going to take an enormous amount of effort, with no guarantee of success. And as Thompson notes, this acquisition essentially forces Microsoft to double down on its strategy (which has signally failed to date) of competing head-to-head with Android and iOS.
There is really zero consumer demand for an alternative smartphone OS: even the ultrageeks fell well short of raising the $32 million they needed to develop a version of Ubuntu for phones. Microsoft is pretty good at giving big organisations what they want—Windows and Office, the two great powerhouses which have between them accounted for all of Microsoft’s profits over the years. And somewhere, deep inside its institutional memory, it knows that once upon a time it came late to the browser game, entered with a big splash, and ended up demolishing Netscape.
The problem is that this second-mover strategy doesn’t work against Google and Apple. It doesn’t work in search, it doesn’t work in tablets, it doesn’t work in phones. (It has arguably worked in gaming systems, which is something of a Pyrrhic victory, given the way in which games are going mobile.) Nokia is a failing company—if Microsoft hadn’t swept in to save it, it would probably have gone bust pretty quickly—and one of the reasons that it’s failing is that no one wants to buy a Windows phone. And that’s especially true in the fastest-growing market of all.
Nokia’s fall has been most spectacular in Asia, a region that its phones once dominated. As recently as