> And I wouldn't bet on that since Microsoft surely sent a big team of their brightest cookies to make a valuation of the company.
The same people who valued Nokia ($7.6 billion writedown) and aQuantive ($6 billion writedown)?
The same people who valued Nokia ($7.6 billion writedown) and aQuantive ($6 billion writedown)?
It seemed mostly negative.
A case in favor of the acquisition might go something like this:
1. Microsoft was far, far behind in mobile, with little hope to catch up through internal efforts alone. "Winning" mobile had the promise to unlock a lot of new revenue across Microsoft's other business units, "losing" mobile threatened to restrict Microsoft to the stagnating desktop market.
2. The industry was already consolidating (Google buying Motorola), there was a looming patent war, Nokia was sitting on a ton of patents, and was one of the few (if not the only) good target left for acquisition.
3. CEO of Nokia was ex-Microsoft, so Microsoft likely had a good idea what they were getting. (Conversely, this could mean Nokia CEO knew exactly how to apply lipstick to a pig to get it sold).
In short, limited time window to act, potential for dramatic growth for Microsoft if it works out, relatively small downside if it doesn't (IIRC the cost was something like 10% of Microsoft's cash reserves at the time). I'd take that bet to be honest.
All of this is speculation of course (I have no inside knowledge), and it was clearly not worth it in the end, but I can understand why a decision like this might have been made.
A good deal of M&A goes ahead despite the warnings from the DD team. Sometimes it's a matter of CEO ego, sometimes a strategic long shot overruling the red flags.
The problem with Nokia was with the disaster of Microsoft's mobile strategy.