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Microsoft applications chief defects to Nokia

16th Sep 2010
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The surprise announcement last week that Microsoft Business Division president Stephen Elop was leaving the company to join Nokia was just the sort of bad news that Microsoft doesn’t need at the moment.

Microsoft CEO Steve Ballmer put on a brave face in an email to employees, wishing Elop well and congratulating him for leaving behind a strong business and technical leadership team. The current MBD executive team of Chris Capossela, Kurt DelBene, Amy Hood and Kirill Tatarinov will now all report directly to Ballmer until a replacement for Elop is found.

During the past year, Microsoft has been struggling against the perception that it has become an ailing dinosaur in the iGooglePad era. In spite of Ballmer’s claim that the business division grew 15% in the last quarter, a cloud of doubt has hung over the company’s applications wing. The latest growth spurt was fuelled by the launch of Microsoft Office 2010, but the division’s sales and profits declined or were flat during the quarters before that.

For the 2010 financial year, Microsoft Business Division revenues fell 1% against 2009; profits were up 1% for the year, but 2% lower than 2008’s results. While Microsoft Office accounts for the lion’s share of the Business Division’s turnover, revenues from Dynamics ERP and business application families such as NAV (Navision), GP (Great Plains) and CRM are so insignificant they do not merit separate lines in the company’s annual accounts filings. And the decision to axe Microsoft PerformancePoint Server and fold its business analysis tools into the Office product group damaged the company’s credibility as a supplier of financial management applications.

For Elop, the decision to jump from one ailing technology giant to another is a surprising career move.

Once the undisputed king of the mobile phone handset market, Nokia has seen its handset-based business model disrupted by Apple’s iPhone and devices based on Google’s Android phone operating system. Nokia is still struggling to catch up, and has struggled to establish its Symbian operating system software in the market for more expensive and capable devices with much higher profit margins.

Before Elop switched sides, rumours were circulating about a series of meetings between Microsoft and Nokia. Was Nokia a take-over target for Ballmer’s gang or was the corporate flirtation merely a smokescreen for some executive headhunting on Nokia’s part?

While some analysts characterised the tie-up as a death embrace of two technology has-beens, the companies last year set up a joint partnership in which Nokia is adapting enterprise apps such as the Microsoft Office Communicator for its Symbian operating system. There is also talk of the possibility that Nokia might take on Microsoft’s Windows Mobile operating system as its primary platform.

It will be fascinating to watch whether Elop cements the corporate links in his new role, and whether Microsoft and Nokia can get out of their current doldrums by making significant launches into the smartphone business application market. Whether they are successful or not, we can expect to see a lot more handheld spreadsheet, BI and business management apps as competition in this sector heats up.

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