The smart money was right. Nokia has jumped into bed with Microsoft and will produce phones running Windows Phone 7.
The cynics would say that, here, we have two lumbering dinosaurs of the technology world clinging to each other hoping that the other gives them a future. Optimists would point to two global super-giants that need each other, both bringing vital components to the alliance.
The big winner is Microsoft. Windows Phone 7, while reasonably well received by commentators, has not set the world on fire. An alliance with Nokia gives it access to the world’s largest phone maker and its huge mindshare—in many developing nations a mobile phone is known as a Nokia. Microsoft’s mobile strategy has been lackluster and tardy. The news that smartphones have outsold PCs for the first time last quarter, has put Microsoft’s core business—selling software for PCs—under threat. It desperately needs a stake in the future.
Microsoft’s “embrace and extend” strategy appears to be alive an well. In an open letter published on Nokia’s website, Microsoft CEO Steve Ballmer wrote “Together, we have some of the world’s most admired brands, including Windows, Office, Bing, Xbox Live, NAVTEQ and Nokia.” It is clear who is wearing the trousers in this partnership.
Google must be smarting a bit today. Not only did Nokia spurn the Android operating system - a recent survey suggests each phone delivers $9.85 a year to Google - but Nokia phones will have Bing as their default search engine. An Android tie-up for Nokia made little sense; the last place Nokia wanted to be was slugging it out with the likes of Samsung, HTC and Motorola, trying to differentiate themselves by cutting content deals and making better user interface tweaks.
But the biggest loser is MeeGo, the ugly, unloved step child of operating systems. The press release says: “MeeGo becomes an open-source, mobile operating system project. MeeGo will place increased emphasis on longer-term market exploration of next-generation devices, platforms and user experiences. Nokia still plans to ship a MeeGo-related product later this year.”
So MeeGo to No Go. Will that device ever see the light of day? Perhaps, but it will be hard to persuade developers and manufacturers to get behind an OS that clearly has been put on the shelf. WP7 will be at the centre of the company. MeeGo may yet end up in other devices; it is after all yet another flavor of Linux, the very popular open-source operating system. MeeGo’s road map always talked about it being embedded in other devices.
That may yet happen, but the omens don’t look good. Alberto Torres, who until today was Executive Vice President, MeeGo Computers, Mobile Solutions, has carried the can. According to the press release he is to “pursue other interests outside the company.”
Along with the eye-grabbing headline, Nokia CEO Stephen Elop also announced the much expected re-organization. Inauspiciously commencing on April Fool’s Day (were the PR team asleep during that bit of the planning?) the company will have two business units: Smart Devices and Mobile Phones. The former will be the new Windows Phone 7 branch. The Mobile Phones unit will continue to develop phones for Nokia’s mass market.
Neither of these two units can expect an easy time. Nokia’s core business - mass feature phones for the mass market - is under severe threat from cheap, mass produced Chinese phones. As Mr. Elop said in his famous “burning platform” memo:
“At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.”
And life is going to be no easier down the line. Smart Devices have to go into battle against the massed ranks of Android backers, BlackBerry and of course Apple and the iOS, armed with only Windows Phone 7. A giant killer it isn’t.
What is worrying is the time frame. Mr. Elop said “Nokia expects 2011 and 2012 to be transition years”. Two years is an eternity in the mobile phone world. Moore’s Law, which roughly translates to the power of chips doubling every 18 months, means phones will be more than twice as powerful. If Nokia is going to be worrying about who gets what office for the next two years, the company is going to emerge into an unrecognisable world.
The market reaction to Mr. Elop’s announcement was as swift as it was brutal. Nokia immediately fell 11 per cent. The markets are going to take some convincing that the company can pull itself out of a hole. But it is the general public who are the real judges in this final dance of the dinosaurs. The deal with Microsoft gives both Nokia and Microsoft a route to the future.
It is a very dark road ahead, and they are starting their uncertain journey right at the back of the pack. At least now they appear to have bought a map.
Source : http://blogs.wsj.com/tech-europe/2011/02/11/nokia-and-microsoft/
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