September 2013

Steve Ballmer couldn't leave his successor without a smartphone strategy. That is the real reason he had to buy a chunk of Nokia. Meanwhile, Microsoft's retiring chief executive also brings in a logical candidate to replace himself. But the deal is also essentially an admission of Microsoft's weakness.

The main reason for the deal is that, without more financial firepower, Nokia could never hope to compete. And with their strategic partnership deal set to expire in 2014, and Nokia struggling to justify continued investment in handsets, Microsoft was facing a dilemma. Were Nokia to dial back its mobile ambitions, Microsoft would lose the toehold it has in the smartphone market: More than 80% of Windows smartphones sold are designed by Nokia. Microsoft says it will grab 15% of the smartphone market by 2018, claiming this means the assets it is buying are worth double what it is paying. But that would represent a huge increase in market share. It is hard to see Microsoft’s market share rising fivefold given how badly Microsoft lags behind Google and Apple in attracting developers to make the apps that are critical to attracting buyers of smartphones. In the personal-computing world, a huge amount of Windows-compatible software helped Microsoft establish its dominance. But in the smartphone world, software developers are struggling already to make apps for both Android and iOS. In trying to solve this chicken/egg problem—needing market share to attract developers but needing developers to build market share—Microsoft can deploy its gigantic financial resources. But it will take more than marketing muscle to get real traction.

Vodafone’s payout from a decade-long dance with Verizon Communications over the fate of their US wireless joint venture was worth the wait. By holding off until now to sell its 45 percent stake in Verizon Wireless, Vodafone secured $130 billion, adding to more than $15 billion in dividend payouts since the venture was formed in 1999.

With Sanford C. Bernstein & Co. estimating Vodafone’s initial investment at $20 billion, the company is getting as much as $125 billion more than that for a sixfold return, according to data compiled by Bloomberg. By holding onto its stake in Verizon Wireless, the most profitable U.S. mobile-phone operator, Vodafone benefited from an almost quadrupling of revenue in the last decade. A deal was reached at an ideal time because growth may be challenged as the wireless unit faces tougher competition for subscribers in a saturated market, said Guy Peddy, a London-based analyst at Macquarie.

Vodafone Group Chief Executive Officer Vittorio Colao has cemented his legacy as the man who shrank the world’s biggest mobile-phone company and cleansed it of past excesses.

In November 2009, just over a year after taking the helm, the former McKinsey & Co. partner said that his mission was to “solve” Verizon Wireless. While the venture with Verizon Communications -- now the biggest US mobile-phone company -- was a source of billions in profits, it was out of his control because Vodafone held just 45 percent. It took Colao five years in office to clinch the Verizon Wireless deal, a wait that paid off as Vodafone held out for $130 billion, $30 billion more than the New York-based company was said to have proposed at the start of this year by people familiar with Verizon’s plans. In his five years as CEO, Colao has unwound the globe-spanning empire his predecessors built, emphasizing profitability over maintaining Vodafone’s size. As he cut holdings in France, Japan, Poland and China and focused on getting out of what Vodafone didn’t control, China Mobile usurped it by revenue in 2010. Today Vodafone trails the Chinese carrier by revenue and subscribers.

Norwegian Internet browser maker Opera Software expects its data-light mobile phone browser will play a central role in a Facebook-led project aimed at bringing Internet access to third-world consumers.

Opera CEO Lars Boilesen said that in emerging markets, some 40 percent of Facebook traffic is already going through Opera. Boilesen said that even though Opera does not expect short-term gain from the project, he hopes it will help boost Opera's user numbers. "Since we started this company, our goal has been to get as many people as possible to use our software. We just have to figure out a way to make money out of it later," he said. Opera generates money from searches and advertising in their browsers, and through partnerships with mobile phone operators. Boilesen said Opera has met several times with Facebook executives, and that "the wheels are already in motion". He declined to give details about the cooperation but said he expected Facebook to elaborate on the project shortly.