Microsoft Learns R95 Billion Math Lesson in its Nokia Blunder

Microsoft Learns R95 Billion Math Lesson in its Nokia Blunder

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(Times Live) – That’s the amount Microsoft wrote off on Nokia’s phone unit, which it bought a little over a year ago for what it said was $9.5 billion. Considering that the deal included $1.5 billion in cash, the write-off means Microsoft now values a business that once controlled 41 percent of the global handset market at just a small fraction of the purchase price.

Thanks in large part to the huge accounting charge, Microsoft reported its largest quarterly loss ever last week ($3.2 billion). It was only the third loss in its history as a public company.

“If you were talking about any other industry, this would be considered a catastrophe that’s the equivalent to a natural disaster,” said Horace Dediu, who spent eight years at Nokia during its heyday and is now at the San Francisco research firm Clayton Christensen Institute, which studies disruptive technologies.

This being the technology business, Microsoft’s still relatively new chief executive, Satya Nadella, gets credit for swiftly confronting reality and taking the hit to earnings. This may have been easier given that Nadella opposed the proposed deal in an initial poll of top Microsoft officials. But Steve Ballmer, his predecessor, was determined to push the deal through as a capstone to his long tenure as chief executive. Even after the deal was revised, and Nadella issued a public statement supporting it, two directors voted against it. Both have since left the board.

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