Microsoft-Nokia Deal Behind the Scenes

If you like big, long articles laying out the "behind the scenes" details of a major deal, the Wall Street Journal has a good one on Microsoft-Nokia.

(Also see: Microsoft-Nokia: A marriage of mobile mediocrities)

Or should I say, Microsoft-Nokia-Google, because the Finnish mobile device maker was considering a partnership with the search giant (and its popular Android mobile OS) before announcing last Friday that it would begin selling smartphones running Microsoft's Windows Phone 7.

Nokia chief executive Stephen Elop was negotiating with Microsoft and Google, finally deciding on Microsoft (Elop's former employer) after Redmond agreed to pay billions of dollars to Nokia for development and marketing costs of WP7 phones over several years.

But Microsoft almost blew it. The WSJ reports that after Elop contacted Ballmer, "his former boss, and informed him that Nokia had started evaluating its strategic options," negotiations got under way. But Microsoft had to get all high-handed:

During this time, the talks with Microsoft nearly broke down, according to a person familiar with the matter. The main issue: Nokia executives believed Microsoft was treating Nokia as it would any potential handset partner, while Nokia was making a "bet-the-company" decision on a software partner, this person said.

Apparently at this juncture someone reminded Ballmer that a Nokia deal with Google would mean the end of Microsoft in the smartphone market. Not a company-killer, maybe, but possibly a Ballmer's Job-killer. Microsoft makes a lot of money doing other stuff, but having a competitive footprint in the mobile technology space is a priority for any forward-thinking CEO these days.

So Microsoft buckled down and began sweetening the deal, coming to an agreement days before last Friday's Nokia investor conference, at which Elop had promised to unveil a new master plan for the company. The idyll soon was shattered by this Twitter indignity:

Although their conversations were supposed to be confidential, Nokia executives were shocked when Vic Gundotra, a Google vice president, on Feb. 8 posted a message on his Twitter account that said: #feb11 "Two turkeys do not make an Eagle," an apparent reference to Nokia's investor conference on Feb. 11.

Three days later, the two turkeys stood tall and proud to announce the partnership neither really wanted but both desperately needed. It's hard to believe shares of Nokia (NYSE: NOK) are down more than 15 percent and Microsoft shares (NASDAQ: MSFT) down 2 percent since the WP7 deal was unveiled. Don't investors know an eagle when they see one?

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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