The Nokia – Microsoft partnership

Image representing Nokia as depicted in CrunchBase

Image via CrunchBase

Both Nokia and Microsoft have stumbled in their smart phone initiatives. Nokia with its dated Symbian OS, and Microsoft with its late to market, some what weak Windows Mobile Phone 7 offering.

The new partnership between Microsoft and Nokia is an acknowledgment that both are very late to market.

Nokia had a choice – continue with its dated Symbian OS (not really a choice), hope to get MeeGo out the door eventually, become yet another commodity Android OS phone maker or do something else. Something else is to partner with Microsoft on Windows Mobile Phone.

I do not see that Nokia had any other useful choice at this point. Google tweeted that “two turkeys do not make an eagle” which is a fair statement on the recent past. If either Nokia or Microsoft had been successful on their own, they would not be making this partnership.

From a Nokia perspective, this is equivalent to Apple dumping Motorola’s PowerPC platform and switching to Intel. That wild strategy worked out well for Apple.  Nokia is dumping Symbian OS and perhaps MeeGo and switching horses to WMP. Will this work out for Nokia?

What it does for Microsoft and Nokia is that both now have a sufficient sized ecosystem to attract software developers which is plus for both. Nokia had its own SDK, but small smart phone market share, so few people wrote new software for Nokia phones. WMP also has an SDK but the initial market size for software developers’ interests is small.

Another important point is that Nokia has a substantial patent portfolio in mobile phone technology. Microsoft is currently suing Motorola in a patent suit by proxy against Google’s Android OS.

Now consider that Microsoft and Apple signed a patent cross licensing agreement in the 1990s. We do not know the details of that agreement but it may be why Microsoft and Apple are not suing each other over intellectual property.

Consider:

  • Microsoft and Apple will not sue each other
  • Microsoft is already suing Google’s Android OS with a proxy suit against Motorola
  • Now, add Nokia’s patent portfolio providing ammunition for serious suits against Google’s Android product.

Microsoft has publicly said that Android is not really free.  The tie up between Microsoft and Nokia creates an IP powerhouse that might result in Android no longer being free – by forcing licensing costs on to the OS. Which creates a level playing field between the non-free WMP and the (currently) free Android OS.

On the down side, both Microsoft and Nokia have stumbled badly by being very late to market with competitive smart phone products.  Creating a business partnership between firms does not address the underlying corporate culture issues that resulted in both companies being so late to enter this market!

Both companies are also known for their bloated R&D staff, which raises costs. Will they address this?

Will Microsoft successfully implement – and rapidly – a bona fide competitive smart phone product that is not lacking in features and does not take 4 minutes to start the phone from power off?

Consequently, if both companies execute properly and quickly, building the right products, this is a compelling product offering and match up.

Yet Microsoft has been a serial product stumbler under CEO Steve Ballmer. Microsoft was late and has missed the market opportunities for:

  • MP3 music players
  • Online music distribution
  • Online search
  • Online video
  • Cloud computing in general
  • Smart phones completely
  • Tablet PCs
  • Social media like Facebook, Twitter and so on.

Fundamentally, Microsoft continues to arrive late to market and hands over market opportunities that it could have easily owned, to others. There is something wrong with the management structure or the culture at Microsoft to have done this repeatedly over ten years.

Oddly, some pundits – mostly financial analysts – seem to think it is better if consumers have fewer choices and think there should only be iPhone OS and Android OS in the market. Financial analysts, apparently, do not believe in free markets where the consumers choose their preferred products.

Instead, this should be good for consumers world wide who will begin to see a broad selection of mobile phone products from the high end down to the low end. Android is already “cheaper to build” and Apple is rumored to be creating a lower end iPhone product.

Apple and Google still have one more advantage – iOS and Android are also used to power tablet PCs, while WMP is not. A common OS across devices makes it easier for software developers to create applications that run on both phones and tablets. Microsoft has not addressed this and instead seems bent on putting Windows itself on tablets to leverage the experience of Windows developers. But existing tablets that use Windows have comparatively short battery life and are physically warm to almost hot to the touch. Microsoft’s approach is to port Windows to the ARM processor – something that also should have been done long ago. But do users really want the Windows UI on their tablet PC? Microsoft should seriously consider WMP – which is built for battery powered small touch screen devices – as the basis for future tablets.

Some people are convinced that the iPhone market and Android markets are  so large that there is little room left for WMP/Nokia. First, this is only the beginning of this market and second, the phone market is not the PC market. People change phones every two years. Yes, all the vendors are tying to lock you into their ecosystem. Apple uses iTunes especially, and Google tightly couples to the Google online cloud. WMP surely does the same.  We will see how this turns out.

In summary, Microsoft and Nokia both recognized their failure in the smart phone market. Tying together in a partnership lets both get products to market faster, at this late point in time. But this will only be successful if both companies fix the underlying problems that created corporate cultures that have been on the backside of the innovation curve, rather than out front. Consequently, the main issue is now whether both companies can actually execute on these plans. If they can execute, the partnership seems compelling to me. But if they continue on with business as usual, then its just two big bloated companies going down the wrong path together.

Scoble has related thoughts and comments. It all comes down to apps and apps and apps. Kind of like location, location, location in real estate.

And what ever happened to RIM and the Blackberry? Hmmm ….

Disclosure – in the 1990s, I worked for Microsoft and was directly involved in wireless technologies there, including discussions with Nokia under NDA. I have two cellular phones – one runs BREW OS and the other runs Android; my wife has a Nokia phone. I am typing these comments on my Mac.

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