Satya Nadella, Tony Bates, Bill Gates & the Microsoft Board All Initially Opposed the Nokia Acquisition

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A new report claims that then Cloud EVP Satya Nadella, Tony Bates, along with Bill Gates and the Microsoft board all initially opposed Steve Ballmer’s plan to acquire Nokia.  Nadella would later change his mind but Bates remained vehemently opposed. Tony Bates is no longer with the company, Gates stepped down as chairman, while Ballmer is now on the board and Satya Nadella is currently CEO. If this report is indeed true, I have a deepened respect for Steve Ballmer. Bloomberg reports:

Ballmer’s relations with the board hit a low when he shouted at a June meeting that if he didn’t get his way he couldn’t be CEO, people briefed on the meeting said. The flare-up was over his proposed purchase of most of Nokia Oyj, and part of an ongoing debate: Should Microsoft be a software company or a hardware company too?

Several directors and co-founder and then-Chairman Bill Gates — Ballmer’s longtime friend and advocate — initially balked at the move into making smartphones, according to people familiar with the situation. So, at first, did Nadella, signaling his position in a straw poll to gauge executives’ reaction to the deal. Nadella later changed his mind.

“Nokia brings mobile-first depth across hardware, software, design, global supply chain expertise and deep understanding and connections across the mobile market,” Nadella said yesterday in an e-mailed statement. “This is the right move for Microsoft.”

Ballmer was so loud that day in June his shouts could be heard outside the conference room. people with knowledge of the matter said. He’d just been told the board didn’t back his plan to acquire two Nokia units, according to people with knowledge of the meeting. He later got most of what he wanted, with the board signing off on a $7.2 billion purchase of Nokia’s mobile-phone business, but by then the damage was done.

 Steve Ballmer was hurt by Bill Gates opposition to the Microsoft/Nokia deal.

Differences emerged over the move into hardware, according to people familiar with the matter. Gates didn’t agree that the world’s largest software maker should produce its own mobile devices, and Ballmer was hurt that Gates didn’t back him, the people said. At November’s shareholder meeting, General Counsel Brad Smith had to persuade them to take the stage together.

They were frustrated by his tendency to talk more than listen, the people said, and his reaction to the pushback on Nokia was for some the last straw. The board rejected the first deal as too expensive and complex, including not only the handset division but also a mapping unit Microsoft didn’t need. Even without maps, Fitch Ratings called the price “excessive” in a note yesterday, citing a deterioration in the user base for Windows-based phones.

 Members of the senior leadership were not on board with Ballmer on the acquisition of Nokia:

In February 2013, on the eve of the Mobile World Congress show in Barcelona, he reached out to Nokia Chairman Risto Siilasmaa and started the talks that resulted in the agreement the board kicked back. Then the handset-only deal was hammered out; it included bringing Nokia CEO Stephen Elop, a former Ballmer lieutenant, back as head of a new devices unit.

Even on Ballmer’s senior team, the acquisition wasn’t universally popular. In the straw poll, several executives initially voted against it, including Nadella and Bates, according to people with knowledge of the matter. Nadella later sided with Ballmer, while Bates remained staunchly opposed.

The former CEO had put Penn and Tami Reller jointly in charge of aspects of marketing, an arrangement they were unhappy with, said a person familiar with the matter. Reller went so far as to tell Ballmer he had to choose between them, said the person. She’s leaving the company and will be replaced by Chris Capossela, who’d been pushed aside by Ballmer’s reorganization.

It was late on Aug. 22 that Ballmer shocked his leadership team with the news he’d be announcing his departure the next morning. Two outsiders who got a heads-up were Siilasmaa and Elop of Nokia, said people familiar with the events. Ballmer called each of them about 15 minutes before the announcement to reassure them Microsoft remained committed to the deal.

Alan Mulally was very arrogant with the Microsoft board when being considered for the CEO position even refusing a formal interview:

While [Mulally] met with members of the search committee and expressed interest in the job, he refused to formally interview, the people said. By early December, his chances faded and Nadella was the leading internal candidate.

The rest the Bloomberg is very lengthy but ultimately rehashes known history and we learn very little new.  If this report is indeed true, and I have not reason to believe otherwise, it is deeply concerning.   Microsoft needs to be significantly more involved in hardware not less.  Ballmer put his job on the line to make this deal happen and for that I have a new and deepened respect for the former CEO.  He went against everyone to make the Microsoft/Nokia deal happen.  Ballmer loved Microsoft above all else, including himself, and he had a vision for the future of company.

I hope the current leadership team and the board at Microsoft understands the importance of hardware and mapping.

Source: Bloomberg

About Author

Suril is a scientist, journalist and obsessive Microsoft observer. He holds an advanced degree in Biotechnology with minors in Biochemistry, Microbiology, and Molecular Biology. Send him tips on twitter: http://www.twitter.com/surilamin

  • rjmlive

    This is interesting. A reminder that even in the boardrooms of geniuses, there can still be just one person that has the guts to consider a new direction. Any less passionate a person would have folded and although the future is still unclear, there is another tool in the shed for Microsoft to continue to be the worlds leading devices and services company.

    • LexicoRed

      A 3 year old child is passionate when he wants candy at the register, the adult uses their intelligence deciding it is not a good idea.

      • Nham Thien Duong

        Ballmer did what’s in the best interest of Microsoft, without this deal Windows Phone would’ve fallen in obscurity, even Windows Mobile which once dominated the market fell into obscurity after O.E.M.’s left Microsoft to join the Open Handset Alliance, Windows Phone is saved, Microsoft will grow. :-)

        • LexicoRed

          Ballmer did what weak un-imaginative manager do all the time, double down on the old bad strategy by doing a huge acquisition and try to save his legacy. But trying to extend an old strategy with a new acquisition only extend the pain and gets in the way of real innovation that could actually help the company.

      • rjmlive

        Time will tell if we’re talking about candy, or the foundations of a company with an evolving direction from which we can pin-point certain passionate moves.

        • LexicoRed

          That is the issue, and sadly where many are fooled, this is not an evolving direction to is just continuation of the same one Ballmer has chased for the last 8 years. Just going deeper and deeper down the same hole.

        • jaylyric

          I wouldn’t called a continuing growing platform “miserably” failing. It’s ahead of IOS in over 20 counties and steadily gaining. Android only dominates because it has had no other strong competition besides the stale IOS for awhile,and it had cheap devices. Now go play somewhere..

          • Guest

            If one of those 20 countries was China, Germany, England, America or Japan it would matter but sadly it does not. That is why the once strong Nokia had to be sold or otherwise go bankrupt. :(

          • jaylyric

            Growth is growth. It increases market share as a whole,and it makes a difference. Besides most Americans in the U.S. are followers. Yes I am an American in the U.S. The key word back there is “most”.

          • Guest

            All growth is not equal. If your growth all comes at the bottom market it unprofitable and for the less informed as yourself that is not a good thing.

          • jaylyric

            Never said anything about it being equal,nor profitable or not.. Mr. or Ms. Know it all. Numbers help attract both users and developers. Period. It’s the same thing for any platform. But again you’re the expert. Someone should hire you.

          • Guest

            But the numbers have not attracted either in fact recent numbers showing this.

            You do not need to point out my superiority, I find it my responsibility to correct ignorance, such as “growth is growth” statements, so those like you can avoid sounding as such in the future.

            Your welcome.

          • jaylyric

            Like I said.. Someone should hire you. Maybe Apple or Google,they both feed stupid people shit like you.

          • Guest

            Both tried but I’m to busy trying to save MSFT from idiots who don’t understand business like Ballmer and ignorant fanboys who puts their bad ideas over what is good for the company…please don’t continue as one.

          • jaylyric

            Hmmm.. Based upon the fact that you’re hatin’ anti-Microsoft ass has something negative to say on many of these posts,that you’re ignorant lame ass is a “fanboy”. Just because someone likes a company in doesn’t mean they are a fanboy,but being the fact that you’re a follower of the crowd.. I can see why you would think such a thing..

      • jaylyric

        Even 3 year olds get their way sometimes. Every adult decision isn’t a good idea.

  • LexicoRed

    What is troubling about this report is that unlike Bates, Nadella acquiesced to Ballmer rather the fighting for what he believed in was right. It is a concern, MSFT needs a CEO that is willing to correct Ballmer mistakes rather the continuing them.

    Ballmer years has wrecked the company, and the hangover may destroy it. He made the company into his image; big, fat and unfocused.

    MSFT will never succeed trying to be Apple or Google. It is time to stop and re-focus on being MSFT.

    • Nham Thien Duong

      I doubt that, Ballmer did a great job, under his ”One Microsoft” vision he unified the company, remaining in islands would’ve eventually broken up the company, Xbox, Bing, Office, Windows, they might’ve all gone separate ways, Windows 8 unified all software makers, it put the best of all into one, Microsoft isn’t trying to be Crapple or Scroogle, it attacks both’s profit makers, Bing Vs. Google’s Ad revenue and Windows Phone Vs. Android & the iPhone, neither company has something that goes with Xbox, and Zune (Xbox Music & Xbox Video) is going better than Google’s Music service, only iTunes remains more popular, Microsoft is heading the right way, to diverge from it would be a disaster. :-

      • LexicoRed

        One Microsoft vision is just a reiteration of the same strategy the company has been pursuing since Gates day. Sad part about many people has been duped into thinking it being some new strategy.

        Ballmer is a great salesman, but he sold you the same old crap in new packaging. If you are a fan of the company it is time to stop defending this and demand better with a genuinely new strategy of focus so the company can be successful in the next wave of innovation not fight the current wave they have already lost.

  • Mark Gibbs

    Agreed !

  • Rico Alexander

    Without making their own hardware, MS would have to count on the likes of Samsung to advance their mobile and we have seen how far they got with that. Nokia would have eventually went Android and then MS would be out of the market.

    • Guest

      At less then 5% in both Phone and Tablets they are out of the market. The only question is how much $$$ will be wasted until they admit it.

      :(

      • Guest

        Good point, for it is not like the good old days where the company can lose billion and billion propping up a product, like xBox, for ten years until it almost starts to break even.

        I wish it wasn’t the case but it times have change and MSFT has to change it old strategy; extend and defend Windows and Office at all cost, needs to changed to a more focus service only strategy. Even if it upsets those who are think sticking to the old ways that Ballmer is trying to by building devices instead focus on what the company is good at.

        • Nham Thien Duong

          Then Microsoft will fail, they’ll either attack Apple and Google now, or play the defensive game, Xbox allows a lot of new features to be included in Windows & Windows Phone, Windows Phone will be the building ground of Cortana, and most of Bing’s awesome features, Bing has since 2013 finally made some profits, Windows Phone is selling well in various markets, and yes, Thanks to Nokia Oyj, but also thanks to Nokia’s commitment in getting Instagram, filling up the ”missing features” with countless of apps, and working really hard on the best hardware there is, they’ll either fight Google, or they’ll see Google Apps taking on Microsoft Office from their powerful mobile base, Windows Phone helps people create Microsoft-accounts, and so does Windows 8.X, Microsoft-accounts means Xbox LIVE-accounts/Gamer-tags and Outlook.com-accounts (Hotmail-accounts), Windows Live-accounts, SkyDrive-/OneDerive-accounts, Microsoft is winning in getting more people to use their software, each platform feeds the other, this is good for Microsoft, and means long term profits.

          • Guest

            “Microsoft is winning in getting people use it’s software”
            ??????
            By what measurement? Not WP sales they have be almost non-existent (and don’t use sill growth % because no sales + minimum sales = big growth % = don’t matter. ), tablet sales (2% of the market)? Window 8 sales (as bad as Vista sales)? XBoxOne (MS already has to do price reduction)?

            None of these are showing people interested in using Microsoft software.

            The only place they are is Azure software and should be the only area the company should focus on.

          • SocalBrian

            Bing is still a money looser, it’s never earned a profit. At times Microsoft has been forced to poor billions down that black hole.

    • XboxerOne

      I think In the future Ballmer will be used as a verb:

      Ballmer; to take something great and really screw it up.

      “They was remodeling the Taj Mahal and Ballmer it by burning it down”

      or

      “They was winning the soccer match by 3 then they Ballmer the game and lost by 2″

      • Nham Thien Duong

        Ballmer will be a verb, if someone wins a basketball game, he Ballmered that game, if someone seduces a woman, he Ballmered her. ;-)

        • Guest

          If you mean…as in he “raped” her, you are correct!

    • Prayaas

      The truth is, Nokia would have become another Sony if they chose Android. The clear winner for Android is Samsung and Nokia would not have lived for long. Period. This is why they abandoned Symbian, and MeeGo.
      Nokia was already facing the financial troubles. Nokia was after them to acquire the company since 2013. They didn’t want to take all their debts along, so they finally agreed to take just the handset division.

      Even so, Android has failed HTC, they would have supported Microsoft, like Nokia was doing.

  • Bryan

    I think many years down the line history will take a very different look at Ballmer than what the perception is today.

  • koenshaku

    Had they not purchased Nokia that would be the end of windows phone. That nokia X device would probably have been a different creature as well.

    • Nham Thien Duong

      That’s the sad truth we know now, Nokia Oyj has always been ”a multiple O.S. company”, while Microsoft under Ballmer is moving towards one O.S. for all their devices, something not even Apple nor Google dare, Microsoft still has a lot to fear, Nokia is divided in clique’s, including Microsoft-hating-/Anti-Microsoft-Clique’s, the S30 Clique (low-end phones), the S40 Clique (again, low-end phones), the Symbian/S60 Clique (yes, Nokia still sells Symbian devices), the various Linux Cliques (TOO MANY to name here) + the fact that they’ve recently purchased Smarterphone, which is also Linux, creating an Android phone was the way Nokia was headed, they might’ve even branded them as ”Nokia Lumia” and ”Nokia Asha” devices, or even replace their MeeGo device with Android, at the end this was the best thing Microsoft could’ve done to secure Windows Phone, in the future they could also just be a company that helps other O.E.M’/.s with their expertise and talent, Microsoft has many to offer, and they’ll also get Nokia’s factories, there was no other O.E.M. that Microsoft could’ve taken that was this good, Nokia is still the world’s #2 (Number 2 (two)) phone maker, as its feature phones still sell really good world-wide, Nokia would’ve most likely forked Android anyway, only they would’ve included Google Play, and offered their own apps on the side (Nokia Music, Nokia HERE Maps, the ”Former Ovi Suite/Apps”, Etc.), the same as they do now with Nokia X, only that device would’ve been Lumia branded, and would resemble Symbian’s/MeeGo’s/S30’s/S40’s G.U.I. which is still used on most of Nokia’s low-end devices, Microsoft would’ve been doomed, thankfully Microsoft stepped in and saved Windows Phone, what Nokia did with Windows Phone was ½ the work, if you own a Nokia Lumia device and compare it to any Huawei. Samsung/Anycall, or H.T.C. you’ll notice 10 or 12 extra settings, and various awesome apps, Nokia Oyj made that happen, Microsoft would’ve failed without Nokia.

    • LexicoRed

      If the success of Window Phone hinges on Nokia the platform is already dead.

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  • jaylyric

    Kudos Ballmer. This will be a great move. Some may say otherwise. Nokia is a powerhouse when it comes to smartphone design. They are also the most important part of the success of Windows Phone thus far. I think that the way that Windows Phone has grown in spite of all that it has been up against is quite fascinating. What needs to happen now is a better more feature focused advertising and marketing campaign and faster pace with releases and updates. Devices need to be consistent across all carriers and released simultaneously. Also this needs to be the case across all markets. Microsoft/Nokia has been making it easier for competitors by not doing this. Thus hindering growth.

    • Guest

      If they was such a “powerhouse” with phone how come they failed so miserablely with WP8.

  • DarCam7

    I still think the Nokia hardware division purchase isn’t as rosy as some people put it. I have doubts as to how well the Nokia team will integrate into the hardware division under Microsoft. How much bureaucracy is going to slow down the innovation process that Nokia has created for itself? How many of the talented folks at Nokia will leave after a year due to differences in thought between MS and the Nokia team?
    If Microsoft bought Nokia in the hopes of stalling its only OEM from diversifying its portfolio with a competitors OS, then it tells you much how lowly Nokia felt Windows Phone was progressing as an OS. This should be a kick in the pants to Microsoft’s mobile division that they have to speed up its update rhythm to keep up with competitor OS’s because clearly Nokia didn’t see much progress (as one of Nokia’s managers said it bluntly over a year ago). Nokia could only do so much with what they had. They added as much value as they could, but they couldn’t crack the high end market and only recently, after three years with the platform, finally made inroads in the low budget market (which brings a set of problems on its own due to to 512mb ram restrictions).
    The fact that Bill Gates opposed the purchase, and there was a rift in the board tells you how fractured Microsoft’s caretakers are in the direction of the company.

    • SategB

      Good post, thoughtfully done sir.

      • DarCam7

        Thank you, sir.

    • me2020

      Nokia has only been in the WP game for 2 years and they are not necessarily the only WP OEM. Samsung and hwawei have both released a few devices for the platform. Once the 8.1 update is released and they achieve “parity” with the other platforms there are really only a few apps that they need to dill the app gap. Once the acquisition is complete , success is just around the corner. They don’t have to be the number 1 platform to make money or to stay relevant they just have to be in the top 3 which they are.

  • Tips_y

    Well, now I understand why Microsoft lost it’s way and got left behind in the push towards mobile.
    If the board could not see that even Nokia was on the way out of Windows Phone, and that no OEM was going to stick around to help them out in mobile, and that the only way left was to purchase Nokia’s D&S, then that means they are equivocal about the whole idea that mobile is the future and that mobile is the way for Microsoft to move forward and be relevant in the future.

    I have new respect for Steve Ballmer if he was the only one who saw clearly the dire situation Microsoft was in. He was the right CEO at the right time during the critical period of decision whether Microsoft stays where it is or push forward and become relevant in mobile!

    And I have new respect for Satya Nadella because Microsoft needs somebody who has flexibility at the crossroad of their move towards mobile. Satya Nadella has shown that flexibility when he was able to change his direction mid-course!

    Now I also understand why Tony Bates is leaving. And Tami Reller’s leaving has all to do with the struggle to protect her turf against Mark Penn and nothing to do with the D&S acquisition LOL!

    • LexicoRed

      A painful and pitiful rewrite of the facts that allows the company to continue the same old strategy that Ballmer himself acknowledge was a mistake.

      The poster would rather the company fight the last fight the focus on creating the next innovation to drive a new market.

      It is small mindlessness of this perspective that sees technology a zero sum game where MSFT only succeeds if the likes of Apple or Google fail. Apple success is they lead mobile, Google success is they lead search, MSFT will fail trying to out Apple Apple or out Google Google.

  • haha123

    Well I agree with Gates. Microsoft should never have been a hardware company. They were born and bred as a software company and they are the largest software company in the world for two decades. Microsoft have always failed in the hardware business (except the Xbox unit). With making the Surface, followed by acquiring Nokia, Microsoft are just hurting their OEMs and partners. Bad move, Ballmer.

    • Guest

      Surface failed, WP failed, Zune failed, Kin failed. But I’m sure that the next hardware dive will be a winner. And if not that one, then the next one, And if not that one…

  • TR

    You guys are completely without vision. A few facts: MS was always doing HW. Even search engines are making their own hardware and even robots. The fruit company, the very successful one, is doing what?

  • WinMetro

    Thank you Satya Nadella for sending Tami Reller back to the kitchen! http://i.imgur.com/hSSe6XL.jpg