Last year we looked at two companies who couldn’t afford to fail in the smartphone space: Nokia and Microsoft. The announcement earlier this month that Windows Phone 7 would become the standard operating system (OS) for all new Nokia smartphones makes sense, yet still came with a measure of shock value. Can we say “I told you so”? Well, no, but the arrangement makes perfect sense, and it might even work. If all goes well this “disruptive” arrangement would be worth billions to Microsoft as it seeks to shave off market share from Google, Apple and the once-dominant (now antiquated) Symbian.
Based on its current state, it’s easy to say the post-iPhone mobile space has been passing Nokia by. While still selling well in the low- to mid-range markets, Nokia has failed to match the success of the N97 (released in 2005).
Microsoft, for its part, has seen mobile operating systems become a battleground more disparate than the battle of the desktop PCs it dominated. The ‘consumerisation’ of technology – where user industrial design and user experience have come to define the success of a product has seen Apple and Google become the pace setters though their iOS and Android (now running on a third of the smartphones on the market) mobile operating systems. The ‘coolness deficit’ affecting Microkia has be to be priority one, assuming boardroom issues don’t sink it.
Iffy connection
For Nokia 2010 proved a particularly hellish year. Changes in the boardroom saw the arrival of former Microsoft vice president Stephen Elop to the role of CEO and the departure of phone unit head Mary McDowell, markets unit manager Kai Oistamo, and mobile solutions chief Anssi Vanjoki (and more) proved indicators of a company more in crisis than transition. Further evidence of calamity came in the open sourcing of the Symbian mobile operating system and its rapid closing; the stalled arrival of its MeeGo collaboration with Intel; and a set of financial results for Q4 last year showing strong sales (up 6%) but declining profits (down 26%). If there was opportunity to show that the company was stable it would be found in the sales of its new N8 flagship phone running the Symbian^3 operating system. While sales in India, UAE and Malaysia have been strong, the N8 has been outsold in Europe by the iPhone 4 at a ratio of 6:1.
Could the optics be worse? Well yes. And they are.
In a 1,300-word memo to employees, Elop fessed up to just how bad things are. Likening the company to a “burning platform” it was conceded that Apple had changed the game for mobile devices beyond the capabilities of Symbian, and that a leadership deficit had let Nokia stall on projects on like MeeGo that it desperately needs. Indeed the N8 is a perfect example of the Nokia conundrum. Clearly an example of groupthink at work its advances in hardware are offset by an outmoded OS, poor user experience and, in Ovi, an application store struggling to attract developers. This writer’s opinion is the N8 would be a great device if only it ran Android.
Now to the other partner in this slow dance, Microsoft.
After debacles like Vista, the Kin mobile phone and Zune media player it would be easy to say the Seattle giant had long lost its mojo, but the performance of Windows 7 (critically and commercially), Office and business products like Exchange still form a robust backbone from which the company can afford to experiment. Windows Phone 7, still relatively fresh from the lab with its snazzy tiled interface, seems to have got the balance right. Taking the better parts of the iPhone (specifically an intuitive operating system) and Android (you will find Phone 7 on a number of handsets from a certain spec), Phone 7 is a product with a coherent strategy, is slick and developer friendly – although it does suffer from an underpopulated app store. Microsoft’s problem with the mobile space is that it has failed to grow beyond single digits and now ranks in fifth place in the smartphone space on only 3%.
When the above circumstances are added up a partnership between an ailing Nokia, and a chastened Microsoft is an example of pragmatic marketing or two sinking ships lashing themselves together for comfort. The rekindling of Stephen Elop’s business relationship with Microsoft CEO Steve Ballmer has also lead to accusations that the deal amounts to little more than a takeover by stealth. But it’s more than that for Microsoft, which already has agreements with LG, HTC and Samsung to produce Phone 7 devices Maybe ‘colonisation’ would be a more apt term. A joint statement from Elop and Ballmer revealed plans for joint marketing initiatives, Bing becoming the default search on Nokia devices and the integration of Nokia content in Microsoft’s Marketplace app store.
Elop’s next step is unveiling a new management team in April. For Nokia it can’t come fast enough.
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