In 2007, when Apple launched its iPhone, a few saw it for what it was — an assault on business as usual in the telecom industry. It helped shift the focus from voice to data. It turned the phone into an anywhere computing device. The arrival of Android only added fuel to the fire — telephony of the past was no more, instead it became a game of software and services.
In case of Google, many of those services come from within. For Apple, those services eventually took the shape of third-party applications (or apps as we call them now.) Six years later, what we have is a world that’s remarkably different — the erstwhile leaders have fallen on hard-times. New giants have taken center stage in an industry that still finds itself in continuous flux.
On the winning side of the equation thus far — Apple(s aapl), Google(s goog), Amazon(s amzn), Qualcomm(s qcom), and Samsung. In the loss column you can include Blackberry(s bbry), Palm(s HP), Microsoft(s msft) and Nokia(s nok).
Today, Nokia announced that Microsoft will buy its devices business for shade over $7.15 billion in an attempt to mimic the Apple/Google strategy of owning the hardware, software and services. The reports of this possible merger had emerged as early as June 2013, according to the Wall Street Journal.
Fly like an eagle, fall like a turkey
Some will argue that the deal is good for both companies — after all, the number three spot in the mobile OS is still up for grabs. I am not one of those. Although Microsoft is still printing money and can afford a multi-billion dollar gamble, what if this doesn’t work out? Can it afford to fritter away a few more years on chasing shadows? There is nothing in the deal than inspires confidence that it will turn two also-rans into champions.
Vic Gundotra, Google’s sharp-elbowed senior executive who, like Android co-creator Andy Rubin, wanted to win over Nokia and bring it into the Android camp about two years ago, put it best when he tweeted: “Two turkeys don’t make an Eagle.” And while he might have ruffled some feathers in Microsoft and Nokia offices, his observation wasn’t that off the mark. Microsoft makes a mobile OS, that the market doesn’t seem to want. Nokia smartphones sales make drying paint seem like a John Woo thriller. It doesn’t matter from which angle you look, the combination of these two companies into a single entity doesn’t add up.
Stephen Elop’s tenure as the chief executive of Nokia would at best earn him a B-minus grade, and that much because he inherited a company that was spiraling down before he showed up. The “bet the farm on Windows Phone move” however was all him. Since taking over the reins at Nokia in 2010, Elop has seen smartphone sales shrink faster than a $5-dollar linen shirt.
If anything, Elop’s tenure at the top of Nokia will be remembered for the years when Nokia became irrelevant in the the mobile handset business. In a post, “The End of the (Nokia) Raj”, I hinted at a future of irrelevance for Nokia. The fall from grace came much sooner than even I thought. Elop is now being widely tipped to take over Microsoft as its next chief executive, replacing outgoing Microsoft CEO Steve Ballmer. Given his track record, if I were a Microsoft shareholder, I would have to pause and gulp hard before putting the future of the company in his hands.
You can’t buy the future in a bargain bin
Microsoft might actually have gotten itself a bargain. It is paying about $5 billion for Nokia’s device business and will pay about $2 billion for licensing Nokia’s patents. In May 2011, there was talk of Microsoft buying Nokia’s mobile device business for $30 billion. The money saved is one thing, but the question that needs to be asked is: what has fundamentally changed with this deal?
If you ask me, nothing really has changed. There is a certain quiet desperation in Microsoft’s move. So far, there has been apathy for the Windows Phone operating system — it accounted for about 3.7 percent of the total smartphone shipments during the second quarter of 2013, according to market research firm IDC. There was only really one company that was building Microsoft phones, and that was Nokia. During the second quarter of 2013, Nokia sold a record 7.4 million Lumia smartphones — only after Nokia cut the average selling price by 20 percent.
Microsoft and Nokia are two sides of the same coin and now they are both under the same corporate umbrella. Buying Nokia and adding 32,000 new employees adds a further and deeper layer of complexity to a sprawling Microsoft that is trying to figure out who it is, and what it wants to be in the future. It can’t let go of the legacy past — Windows and Office still print money for the company — but its future path is littered with mines. The company essentially fired (though not in as many words) its chief executive officer.
Microsoft’s legacy as a PC monopoly holder made it incapable of handling the fast changing, rapidly shifting post-mobile world. And now for the next year Microsoft will be distracted by integrating the two companies — all at a time when Samsung will be releasing a barrage of new phones, Google will be improving on Moto X and Android and, lest anyone forget, Apple will have a trick or two up its sleeve. Oh, by the way, there is that other Seattle-based company: Amazon has been quietly working on its own phones and has plans to take on the current smartphone establishment. And they don’t even care about making a profit — they just want marketshare.
In theory, Microsoft is getting a great engineering team, a great product design team and a great brand (well, better than Windows Phone). However in reality what it is not getting are the intangibles. In the course of my seven odd years of reporting on Nokia, I have met many talented people and many of them had a lot of pride in working for the company. It was the shining achievement of Nokia and its engineering culture. Even when things got bad over past few years, many believed that Nokia had the talent to help things around. I made a few phone calls this evening, and all I hear is a sense of quiet despondency and loss of hope. Working for Microsoft isn’t working for Nokia, is a common refrain.
The Third Mobile Option
There is a widely held belief in the wireless business that there will and should be a third option to Google and Apple. Indeed, for the longest time the arguments were made for Blackberry (LOL!) and then for Microsoft. Some talk about Firefox OS.
I ask the question: why can’t the third option actually be Android itself — and what I mean by that is the non-official, non-Google Android. Amazon already has forked Android. Chinese vendors are building their own flavor of Android. Samsung too wants to control its own destiny and build its own flavor of Android. Sure, they all have the same OS foundation, but eventually all these alternative-and-custom flavors of Android can all be the third option.
If there is one upside, then I do believe that this just might be the best thing to happen to Finland and the Finnish startup scene. A lot of the talent draining out of Nokia will look for new opportunities in their areas of expertise — radio engineering, manipulating sensors and embedded systems. If anything, this is Finland’s big opportunity to become the epicenter of the Internet of Things.
96 thoughts on “Why I think the $7.2 billion Microsoft-Nokia deal is a terrible idea”
Microsoft has a pretty poor track record with devices (Zune, tablets, etc). The only thing which has done reasonably well is probably the XBox. And if you go by what it has done and continues to do to Skype, it doesn’t bode well for Windows Phone as an OS either. This is nothing but a last ditch effort to pull out a rabbit from the hat. But what Microsoft needs is some real magic triggered by disruptive innovation and not a magician’s illusion. Steve Jobs is often criticized for his “reality distortion”, but he backed it up with path-breaking devices and technologies. Microsoft has so far not done that with any device. Hoping Nokia will be the messiah is just wishful thinking.
Great article. Couldn’t agree more.
Predictably, the most anti-Microsoft and Apple-obsessed websites, like this one, are quick to air negative views on the latest MS news. 🙂
Predictably, yet another Microsoft shill crawls into the commenter crowd when the article is not to flattering of Microsoft, tries to defend and/or put a positive spin on the deal, and automatically attributes being anti-Microsoft as being pro-Apple.
Just listen to yourself, Tim Acheson.
If the two software units (Microsoft’s and Nokia’s) now work more effectively together, under the same umbrella, as compared to being in two separate companies, the time to market for new smartphone innovations could significantly increase. That’s a reason to disagree with the analysis here. However, my “if” is a big “if” 🙂
For some background thinking, from March 2011 but still relevant, see http://dw2blog.com/2011/03/02/on-turkeys-and-eagles/
Hm, I don’t think you said what you wanted to say…
Still, MS did not manage to make its own departments on the same campus work together. And now they will change the CEO, do the largest restructuring in their history, plus integrate another 32.000 highly irritated “foreigners”… and this will automatically and magically improve something? I would be astonished.
Microsoft don’t really have a strategy as such, other than making sure it — whatever “it” happens to be — is capable of running Windows.
Deal may be risky but will help MS to reach to wider strata of developing economies, Brand-building….
Thanx for the great article, good to know.
So Stephen Elop steps down from Nokia (or whatever will be left of it) and goes back to Microsoft?
Anyone else think that this deal is rather *personalised*….
It’s been “personalised” since “the burning platform” memo and move to WP.
At least Nokia shareholders will finally get closure, just not the way they hoped.
I believe Nokia was being pressured to go Android and this Microsoft could not allow because it would have been the death of Windows Phone.
“At the start of every day I make myself three promises — I will limit the amount sugar I consume, have little or no salt and whatever I do, I will not let my preconceived notions come in the way of learning. I am successful about half the time, but rest of the time I am faced with my own limitations and weaknesses. A scone here, a little curry there, and of course, looking back into the past and making a snap judgement about something in the future”
After reading this article, I’d not be surprised to know making snap judgments is your biggest weakness of all 🙂
WTH ? people knew this right from feb11 when elop killed symbian and the play then on has been about killing nokia softly. every move by elop was designed for maximum microsoft benefit – closing down “unnecessary” divisions (unnecessary to microsoft). unless you were living under a rock – this was pretty much on course, and well discussed for 2 years since feb’ 11.
Well, can the Nokia teams really work with the Microsoft people?
It’s a very striking organizational change – first One Microsoft, now One=Microsoft+Nokia? We’ve all seen the famous organizational charts of big tech company cultures – Nokia wasn’t included amongst them, but I still predict the problematic part in this equation is Microsoft.
Om, great article. I understand your reasons for declaring this buyout a failure but I really do not think Microsoft has any other realistic alternative. We know from their tablet sales that their mobile strategy is not taking off and I see this buyout as a bet to claw back into the game.
In fact it is surprising that they did not do this a while ago when they announced their partnership with Nokia.To me the partnership was a half-hearted effort to get into the mobile wars and the buyout should really have happened then.
Price was an important factor when Microsoft/IBM won PC war with Apple MacIntosh in the early days of PC
apple’s via its Mac line is the most profitable PC maker in the business. not bad for having “lost” the PC war…i wish my business could “lose” like that.
Your article is so riddled with errors i stopped reading it just to post this comment… They bought Nokia for about $5 billion not 7.2 and don’t know what bubble your living in… Amazon isn’t exactly successful in mobile… The kindle fire is a flop and they barely have a presence outside the USA.
The difference refers to a licensing fee paid for Nokia’s tens of thousands of patents.
What I liked most. “Oh, by the way, there is that other Seattle-based company: Amazon has been quietly working on its own phones and has plans to take on the current smartphone establishment. And they don’t even care about making a profit — they just want marketshare.”
Android at #2, and Android #3 help get #Android to #1?
MSFT just bought the only Windows Phone OS customer. So they are in the device and App Store business. This means $7 billion to be #3 in a business where only the top 2 make money.
According to Google, they, Google do not make money on Android. So I am not sure I follow your logic here…
Whatever is said about Microsoft’s serious blunders of the past few years it is still a company ‘built to last’ to use the hackneyed phrase. They recognize their missteps which Bill Gates admitted to a few months ago.
Purchasing the Nokia devices division at a knockdown price is a smart move – they paid more for Skype. Would not be surprised if Ballmer’s resignation was tied to the Nokia acquisition ie. the board agrees to purchase if Ballmer quits.
At a party last weekend, a longtime Android user (in the UK) said their next phone was going to be a Nokia Lumia as that was what others were buying as the next must have phone. I was incredulous but you just never know what young people are going to do and why.
As a (relatively) long-time iPhone user, I’m hoping that Apple don’t slack off, particularly with regards to cameras. The iPhone commercial I have seen more often here in Singapore has the line “more photos are taken with the iPhone…”. While that is likely true, unless the iPhone 5S becomes actually available here (in Singapore, a technology-lagging Second World company town) much later than the Lumia 1020 does, I’m planning on buying the Lumia to replace my ageing iPhone 4. Some American friends of mine have been sending photos they’ve taken with their 1020s, and they have the same sort of awe and wonder as people did when they got their very first camera phones.
The best camera you own is always the one in your pocket. People here do three things with their smartphones: send texts, take photos and get on Facebork. Your phone doesn’t really need to be very “smart” to do any of those, and great (or even decent) photos are the hardest-to-accomplish of the three. Which phone helps the average-to-poor photographer get the best photos? It’s not the Camera app in iOS 6, is it? Please?
Speculations and judgements aside, I wholeheartedly agree with the comment that Finnish startup scene will now witness new breed, passion and rigor.
Extremely pessimistic, unwarranted opinion piece. Microsoft is in the midst of a massive reorganization with enough cash to work lots of magic. It is a bold move that needs to be watched carefully, and its potential is huge. I don’t understand the tone, nor do I appreciate it.
“Extremely pessimistic, unwarranted opinion piece”
hilarious! move over to a site where they’ll serve you some nice pro microsoft PR.
What a great, well written article!
@Om, the third option will really be Firefox OS. The reason is, all mobile platforms switch to HTML 5 standard eventually. Yep, Android has been a mere transfer station for Google to catch up with Apple. By the way, since Google’s approach in licensing Android OS to third parties has proved successful, neither Blackberry nor Microsoft will cut it. Mobile industry is about innovation which thrives in openness.
Thus, should MSFT become competitive, their mobile phones must come up with IE OS and perfect HW.
mobile is no more likely to switch 100% to HTML5 as a platform than desktop. why? compiled apps run faster and transmit less over the air (no markup). yes, HTML will get faster, but in that same time frame compiled apps will get faster, too (see history).
Actually it’s much simpler. Compiled apps = differentiation. HTML5 apps mean a more leveled playing field.
OEMs will continue to milk Android while they can. The minute Google tries to squeeze any profit out of it instead of the services it piles on top of it like supplementing its ad business for example, the OEMs will flock to whatever is the next economically feasible option.
We saw this with iOS. Google asked for fees on Maps and Apple said adios…
Per Kantar: “Windows Phone has posted its highest ever level of 8.2% across the five major European markets”
MS has lock on 3rd spot whether you like it or not. Forked Android phones will need app compatibility, so they really can’t stray far off Google’s lead.
So Om, you wanted Nokia to fork Android as the “third OS”.
This of course would mean no Google Apps, no Google Play Store, no Google Now.
It would also mean no shared development with Google, always being a version behind.
They could not even say they ran Android, as that is a Google trademark.
Of course they would be able to run Android apps unmodified, like Blackberry 10 can. That did not work out too well for them, did it.
So in short, they would have none of the advantages of running Android, the same deficits they have at present and no multi-billion company ready to bail them out.
OM, I dont think you thought this one through at all.
Great Article, however Nokia shareholders thought it is a great idea!
Great article. This has been my reaction to the news this morning as well. The tragic part for me is Nokia. If they had hired almost anyone else but Elop, maybe they would have produced an Android device, and as such, been able to remain in competition. Too bad! I get the feeling that at best this deal will do nothing for Microsoft. At worst, yet another bad move and a large write down. For Nokia and the Finnish? Oh, you poor people! Sorry about this!
That’s funny. I always thought they were anti-Apple and Microsoft-obsessed.
I’ve read the same runes as you but have come up with a completely different translation!
I think Apple has made the mistake! People want to be able to use their devices for more than just playing games, watching movies and interacting in social media, and actually the iPad / iPhone falls woefully short of doing that effectively. Indeed the way the 3rd party apps work, their refusal to include decent ports and Apple’s tardiness towards having more than one app working at the same time, have made the iOS look practically Heath Robinson.
I can fully understand Apple’s reluctance up until very recently to let Office on their Hardware – knowing that would show up their limitations.
My personal journey has taken me from long-term Mac user, to seeing the benefits of Android, to looking at what Microsoft were doing with Tiles to finally seeing Canonical’s vision of device convergence.
Apple made many mistakes. Including allowing Google to scarf up their 200 Million users free of charge. By saying no to Google Maps and YouTube with iOS 6, essentially Apple gave Google the green light to make their own App that pumps all that iOS data directly to Google and benefits Apple in no way what so ever. When those apps were baked into the OS Apple had full control over them. Now Google can connect the demographic and both real world and digital psychographics thanks to that very myopic move by Apple.
By insisting that users should only focus on 1 thing at a time (aka immersive or whatever) Apple has opened the door for others to come in a take market share away. It may not be all going Microsoft’s way, but it’s clear that in Q3 2013, if you’re going to bring a tablet to the market and claim that it’s suitable for both play and work, then it better be able to do more gymnastics than what Windows tablets can do. They may not be outselling the competition, but they sure have raised the bar, AND lowered the cost of acquiring one.
Om, I totally agree with your observation that this event will benefit the Finnish startup scene.
Elop did more damage to Nokia in shorter period than Ballmer did for MSFT so now I understand why they needed to join forces.
I´m gonna save this, for the future, wich I think will see this merge as a winner move.
Malik, do you know that “the market” is not just the US anymore? Do you know India? The rest of the world, where WP is groinwg very fast, do you know that it also is “market”?
fast ? how fast is that ? micromax which sells only android phones sold more smartphones this year than nokia, they are number 2 after samsung.
Reading between the lines: for such a Micro-phobe as Om to get this worked up, clearly there’s something right with the deal. Congratulations Microsoft!
they won’t get to use the Nokia brand for their phones, the deal only includes the Lumia and Asha brands. Good luck with another huge marketing budget to convince consumers MS is a phone company….
the forked andriod being no.3 situation is interesting, it’s not ideal for google, but still it helps take marketshare from Apple, their original fear was a Apple monopoly that locked them out, I guess it’s not a bad situation for them.
Per the Nokia press release. Microsoft will get an exclusive right to use the name Nokia on current products until 2016 and a non exclusive from 2016 until 2023.
Nokia/Navteq is the only company that has the data to drive a car. They have test cars rolling about. $7B may not be the best price for this data, but it is worth half of that to somebody. I can’t believe that Apple didn’t buy them.
Nick, the idea that Nokia can now focus on giving Google a run for its money is bogus. Navteq is way superior to Google’s. Om is just drunk on Google that’s all…
“Nokia/Navteq is the only company that has the data to drive a car. ‘
and we have google cars that drive by themselves!!!
you’ve gotta be kidding. navteq is an old world company. google has been doubling in size every quarter. their maps has gone from being poor version of nokia maps to a comfortable competitor. pretty soon, they’ll beat navteq
This has been one of the worst displays of Journalism. Om, do better my friend.
for that, go to a pro-microsoft site, and you will get your daily fix. lol
Legitimate opinion, although it’s obvious that the author doesn’t like too much Microsoft, Blackberry and Apple while he favors Android. I think it’s sad for Nokia, one of the telecommunications heroes of the 90s. But, I think Microsoft and Nokia will succeed in this game. Microsoft will integrate die Nokia hardware into their cross-device “Surface” concept (PCs, tablets, phones, furniture), which could be interesting. I think, Microsoft “Surface” will be the third option and the fourth option will be Blackberry together with another player, why not Facebook or yahoo?
“In theory, Microsoft is getting a great engineering team, a great product design team and a great brand (well, better than Windows Phone)”
Only if you mean Asha and Lumia, since the Nokia name is not part of the deal.
Microsoft has an exclusive on the name Nokia until 2016 on mobile products. They also can continue to use the name Nokia on mobile product until 2023. Exclusivity runs out after 2016.
I’m sure many feel like you, given the price action on MSFT today. I’m just not one of them. Being a hands-off software company may have worked 30 years ago, it won’t work today. Droid and Window mobile have no chance of becoming a decent platform as long as the approach is to hand it off.
A good product starts and end with the hardware not the software. That’s why Apple killing these guys. Have you noticed, only Samsung is profitable with the Android platform. Why do you suppose? A very close partnership with google to build a device that somewhat integrated.
In the long-run Microsoft will introduce many (emerging market) to their window products (like google did with android platform) and will resolve some of the clunkiness of the widow mobile platform.
This is not a bad think for Microsoft…. Time will tell….
“only Samsung is profitable with the Android platform. ”
Sony had a revival thanks to it going android. in fact they dumped windows phone altogether!
Good points on the third choice being Android itself. A shrewd company would embrace, extend, and extinguish Google’s Android, like old Microsoft used to do.
One key way of looking at this is that MSFT was able to use their Non-US cash hoard for the purchase. That gives them approximately a 30% discount after you take taxes into account.
Stephen Elop from Microsoft goes to Nokia to be made its CEO. Microsoft now buys Nokia & Stephen re-joins MS.
Brilliant plan well executed! He was a Trojan horse sent by Microsoft to destroy Nokia!
So that Microsoft could buy a sick unit at a much lesser price!
As always, Om is negative on Microsoft. What a surprise!
Om, what were you expecting them to do? Start building Android phones? Evaporate from the consumer space and just stick to Enterprise? Get real man!
They are profitable. They are getting into the market at a reasonable cost. They last series of acquisitions have been right inline with their strategy. Skype, Yammer, for example are services. Kinect and Nokia are devices.
They’ve recognized that the future of their cash cows (office and windows) is to become services and maybe devices somehow (like conferencing equipment maybe).
They are not Google (thank God for that), and they are not Apple (We don’t need yet another religion in IT). They’ve embraced the cloud. They are competing with Amazon on AWS. Azure offers Linux right along side Windows servers.
Windows Phone specifically is growing steadily. Market share without a plan to become profitable at some point is not sustainable. Amazon producing yet another Kindle like device is great. I think it’s clear Windows Phone is not only taking small market share away from Apple and Android but it’s also been able to accomplish what those 2 couldn’t and that’s drive the dumbphone to smartphone transition.
What more do you want from Microsoft?
“What more do you want from Microsoft?”
curl up and die.lol.
for the convicted monopolists they are, they were pretty successfully sending elop to do a hit job on nokia! man, in the panteons of corporate raiders , elop’s name will shine the brightest for how he took down a company the size of nokia and sold it for less than the size of a piece of software like skype. amazing!
Ashok in business if you’re not trying to dominate your competition then you’re not in business.
Please stop with this monopolist crap. Apple has a monopoly on its products. Google has a monopoly on its own products. Please grow up and apply a 2013 lense to a 2013 discussion.
What the DOJ penalized Microsoft for in the 90s no longer applies. You calling them a monopoly says you’re stuck in the past.
They’re a business just like any other and a very successful one. Please respect the thousands of people who pour their blood sweat and tears into making the products that Microsoft produces.
Google has a monopoly on the digital ad business. Yes there are a lot of competitors but Google takes an obscene amount of money out of every online/mobile ad dollar. Even Microsoft tried to enter that space and failed. Now Facebook is giving it a run. Why do you think Ms. Mayer is over at Yahoo? Yahoo till today is still the second largest digital ad entity on the planet. May not be making money, but if anyone has the ingredients to take on Google, those ingredients are over at Yahoo. Just wrong leadership so far…
So please enough with this crap about Microsoft being a monopoly. When Sun cried to the DOJ they were pushing SPARC stations that started at 10x the cost of an average PC. Let’s get real here…
It’s 2013. Use a 2013 lens to look at the facts please.
What’s good about the article is it’s un-ambiguity. What’s not so good (or not so founded) is the pessimism.
Granted that the buy out of Nokia might not make a killing in the market overnight, but there is hardly a better option. Should Microsoft have used their dollars to buy some other handset maker? Should Nokia have divorced Windows and gotten into the Android party? Frankly, none of that makes sense.
On the other hand, the windows 8 Phones are not bad at all. Yes, everyone and her grandma has android devices aplenty, but these devices are not immortal. Far from it. Your shiny new Sammy Android toy will look vintage in a year. And in 2 years, you will need necrophilia to make you want to carry one around. So the key question to ask is not what phone OS you now have – but what will you have in 2 years.
Because, in that time, Microsoft could get lucky or smart…Their technology is now finally looking good. Their rivals are hardly innovating. The initial euphoria of millions of apps is making way to a handful few which are present on all platforms – thus the platform is not a differentiator. The tablet market is under-served (iPad hardly has a worthy rival) while the PC/laptop market is ripe for a transformation…and if anyone it is Microsoft that is best placed to dance with the prom queen.
Yes Nokia played the price game to gain some market share. But hey can anyone explain the pricing for Nexus 4? That amazing device costs a third less than comparable rivals – the Lumia 920 and 820, the Galaxy S4, the top-end HTCs or Sony etc…(No, I cannot even mention iPhone in the same sentence as Nexus).
When Google offers popular Nexus devices for peanuts, or manufactures a mere handful of motorola phones, somehow that is considered cool/strategic. When Microsoft does something similar, it is a sign of desperation..c’mon, the elephant in the room is Samsung and everyone else is playing the same game of survival….
My own prediction is: Microsoft will claw it’s way back to a respectable 20% market share in 2 years. Google will lick their korean inflicted wounds while still printing dollars, and Apple will carve out and stay put in their niche. What Windows, Unixes and Macs were to the PC world, Android, Windows and iOS are to mobile.
“My own prediction is: Microsoft will claw it’s way back to a respectable 20% market share in 2 years. ”
they said that 2 years back. they said wp7 will change everything, then they said “mango, and then ” tango” and then 8. now they say 9 will usher FHD and nokia in fold today. so who knows what will happen in another 2 years ?
personally, I got fed up of lack of apps / services for symbian, and I went through this phase of wait until the platform has more developers. it’s the same with WP – it has the worst of both ios/ android platform. it’s proprietary/ closed and it’s got no developer traction
The path forward is often chosen based on goals (where do we want to go?) and obstacles (where can I go?). Those are both reasonable considerations, and it is a widely appreciated business strategy to “shake things up” – I’ve done it, and most of us agree that there are times when it makes sense. I suspect that this is one of those times for both Microsoft and Nokia. The union will, at the very least, eliminate barriers to closer technical and go-to-market cooperation. While it will no doubt alienate some parts of the ecosystems both vendors have built, it isn’t clear that those ecosystems can be maintained in their current forma anyhow – this will, at worst, accelerate the inevitable. I wouldn’t bet that this hook-up is a stroke of genius that will solve all problems for Microsoft, but I’m not betting that it’s a bad move either.
I love my Windows 8 Phone!
I HAVE HAD WINDOWS 8 PHONE FOR A LONG TIME. I LOVE IT.
In all of the things going wrong at MS, why does the Xbox do so well? Isn’t it? What went right in that division and could that not be replicated?
Whoever got Xbox where it is should be running the overall strategy, no?
3rd option should be the SkypePhone – right Om? SkypePhone. Genius…
Nokia is skilled at marketing low-end cell phones in poorer countries. If Microsoft can get the hardware costs down–and hardware costs are always coming down–they could take over the smart phone market in developing countries.
Who knows! Cell phones as computers might do remarkably well in countries where most people can’t afford either a computer or a tablet.
yeah, but Nokia is losing that market as well in key markets like India. There’s a reason they have flagship phones that are aspirational, driving sales of the lower end as a rub off. Nokia lost its way trying to build their entire business off windows phone. nokia did do well with their low end WP phones – but that was only after steep discounts , and the fact that low end androids were not yet there in that price range. this year – there’s a huge change with mediatek based phones sweeping the indian market. tough times ahead for microsoft/ nokia
Microsoft will now compete with handset makers that used to be customers for its mobile software. That strategy doomed its Windows Surface tablets.
perfectly summed up!
Never know, Nokia may buy Jolla and start a new in 2016.
so you’re a seer now?hahahah last year everyone bashed the MS mobile OS for being an under achiever at 4th position, and let’s look at what happened?sales and marketshare rose ’til it was in 3rd position!!no one wants it?yeah, we can clearly see that people don’t want a Windows Phone.
It is very easy to criticize every move of Microsoft these days. only time will tell. The acquisition is inline with their strategy and its better late than never. If not this deal, can the Author tell/think of any other ways to save the Windows phone ecosystem ?. There is no magic in Windows phones but it is far better than Android security flaws and fragmentation.
Great points and adding:
There already is a 3rd option – Chrome, which may play fake to evolve from tablet to phone. And as you point out Android is a three headed beast addressing all segments and price points, including with Sony and Samsung camera options, the one area that Nokia hoped to gain with 14 megapixels.
One has to ask. Has MSFT learned nothing from Ballmer’s reign of acquisitions. The big acquisition approach is a bad idea. ($24B approx in large acquisitions and tons of smaller ones with Ballmer as CEO – got them what?) This merger is like two desperate lonely and ugly people hooking up when the bar closes at 2am. Heck they could study HP to get an even better case for not doing acquisitions.
The acquisition strategy merits a click thru. A franchise (Windows/Office, or HP’s Ink cartridges) creates a false sense of security to make big acquisitions to achieve growth and beat the “innovator’s dilemma” which should really be called the incumbent’s dilemma. But this trick must be used sparingly with great due diligence. There are many hidden costs. But the very worst is that the acquirer can almost never manage a large acquisition – too much complexity and well-entrenched cronyism even if the vast majority of the people are brilliant and of the utmost character.
Together they will have $21B in goodwill in the new balance sheet – a write down is coming – easy prophecy.
But the worst: MSFT will likely neglect their cloud offering – the leader in that group could make the best CEO. Someone who can “think different”. And to protect their hardware biz, neglect Office for iOS.
Microsoft should have gone to its roots: software, and not try “to be like Apple”. Trying to be like Apple is not innovative and it will be extremely difficult to beat Apple and others competing with Apple, like Samsung. The reason being is that to be Apple, you must have a certain culture and mindset in the company that clearly Microsoft does not have and that it can take forever to try to obtain. Instead, they should have stayed in the mindset that they already know, Software, and look for opportunities there. Ironically, HP, mainly a hardware company, tried to move deeply into software with the acquisition of Autonomy, with the results that we already know. The internal HP mentality just could not embrace Autonomy and the software business and soon most Autonomy employees left. Microsoft already had the mindset for software and they should have leveraged this key advantage. Microsoft then is playing to its weaknesses, not its strengths. Usually, this is a recipe for failure.
One first step in the right direction would be to release ASAP true Office apps for both iOS and Android. There are many, many millions to be made here. They have to do it before it is too late and other office-like apps become standard in these platforms.
you’re good. you’re really good 🙂
Excellent article. I completely agree with the comment about the missing magic, and today neither MS nor Nokia is bringing this magic into the deal! The only valid argument for the deal I see is the feature phone business, but that won’t pay off in the short term.
Typical “lemming” like response. Each of the Microsoft devices were/are technically
superior. Apple has always been overpriced…yet very “pretty” and well marketed. Further yet, it is always good to have a level of competition. Thanks to Microsoft, Apple was able to stay in the game.
Thanks for the link, the dialogue made me laugh, “ two turkeys don’t make an eagle. “
MS has already tried their hands in production of handsets, but they never touched to the reality.
since Google has already integrated all its services on a single platform, observing the me-too trend, that is well expected from MS. In fact they have much to offer when it comes to services. Like enterprise cloud services.
MS has some good patents on Kinects, and Nokia has always dreamed of providing compact SLRs on their phones. It will be of no surprise to see Kinect like things getting used on their phones. Sir, Gaming and virtual reality can be best expected from this combo. MS certainly has power to do so.
The questions remains are, like Apple, will MS use this Duo combo and their patents effectively, or Nokia will be made sink to near death like Motorola like by their new master( well, maybe they were already dead when they were taken over, and their master never did care for it)? Will MS keep this ecosystem excessively limited to its own arsenal or other OEMs like Samsung and HTC will still use it for their devices ( that will be hazardous if they are looking forward to pull down Samsung from the market)?
well, but since now the 3 top most IT Product giants will compete for the same product based market share with equal potential, technology can be best expected to serve the users.
Let’s see what happens next.
The inevitable massive exodus of engineering talent from Nokia will cause some interesting things to happen in mobile. Microsoft keeps talking about “innovation” and “experience” but what they really have is a mobile operating system that *everyone* hates. Microsoft has already lost in mobile. Historically they manage to get something usable out by the third try, but in mobile they’re on try number eight now, and it’s still utter garbage.
Face it, Microsoft: no one wants your crappy phones, even if you force desktop users to have an “experience” that looks like your crappy phones.
Microsoft buying Nokia is risky. I say this because it reminds me of HP buying first Compaq and then Palm. It didn’t work out well. These large companies with thousands of employees and corporate cultures do not mesh easily. It takes time and desire on all sides to get the new enlarged (engorged?) company to be it’s own beast.
I hope Microsoft goes on but really I think it will calve off smaller companies like a glacier. The “iceberg” companies would be more nimble, hopefully.
(All this iceberg talk is making me think of the Titanic, subconscious?)
What a horrible way of killing a great company. Only the name “NOKIA” should have costed more that $7bn. R.I.B Nokia!
Why Do you kill the comments?
One word. Patents
Just because Windows Phone didn’t take off, doesn’t mean it’s a bad product. I love mine.
Good article and good points @Om. However, one point that you neglect to mention is that both these companies has no choice but to do this. Symbian wasn’t killed by Elop. It was killed by Android and iPhone. MS needs mobile as a core element of their strategy. All in all Windows Phone is a good OS and many would agree if it wasn’t named ‘windows’. So maybe this may work out in the end and have Microsoft the 3rd place in the mobile OS game.
i hope Nokia+Microsoft devices will not be easy to hack like all Windows versions.
Agree. Agree. Agree. I can’t agree more!
Microsoft will fail. Its destined. Why would they take a perfectly good company and reputation, then throw it away for 7.1B? That won’t ever make sense in my mind. Because Microsoft isn’t in a place where they should be eliminating competition in any way. They also don’t know the mobile-phone playground as well. Now as reported here – http://VaultFeed.com/nokia-mobile-and-microsofts-new-project/ – Newkia is coming with a comeback from previous employees! craziness… thats all!
I have owned and I own Nokia 6670, N91, N8, 808 Pureview.
I believe Nokia has changed by a huge margin. No more Nokia for me now… I liked how Symbian was improving and catching up, even in 2012. But the Trojan Horse killed Symbian and MeeGo.
It was nice being a customer of Nokia.