Altabel Group's Blog

Nokia-Microsoft joined forces- is that a chance to get back in the game ?

Posted on: February 17, 2011

Lately Microsoft-Nokia deal has arisen much interest. Some compare this mobile partnership to [an Olympic track race in which two of the tired runners that are fading from the front decided to hold hands until they get across the finish line]. Others expect them to become the [game-changer that will transform the smartphone market into “a three horse race” with the lapse of time].

And what’s your bet on what Nokia-Microsoft deal will lead to in the short-term outlook and in the long run?

It was announced that Windows Phone 7 will become Nokia’s primary smartphone platform; still the deal is not exclusive; Microsoft will continue to have other hardware partners and Nokia will still make some Symbian and Meego devices.

CHALLENGE #1. Why did Nokia choose WP7, not Android?
When Nokia went shopping for platforms, it was courted by both Google and Microsoft. On the face of it, Google’s Android would have made more sense as Nokia has already been working with an open source OS in Symbian and Android is open source and more malleable than WP7.
Still Nokia picked a single platform and chose WP 7. In the short term, going exclusively with WP7 will likely cause Nokia phone sales to plummet even further in the market share race as traditional Nokia fans flee the flock.
The best move seems to become an awesome mobile OEM and support both Android and Windows Phone 7.

CHALLENGE #2. If the deal makes Nokia of the favored status to Windows Phone 7 will it mean that other WP7 partners will put even less energy into the WP7 ecosystem ?
At CES 2011 it was evident that Samsung, HTC, LG have put a lot more emphasis on their Android devices. WP7 seemes to be used as a hedge against Android so that if Google gets too pushy they can threaten to put more of their resources into WP7. The Nokia deal will likely keep them focused on Android even stronger.

CHALLENGE #3. The deal with Microsoft may spoil Nokia’s reputation in Europe.
Europe is the where Nokia has its biggest fans and its greatest strength in market share. It’s no secret that vice versa Europe does not like Microsoft due to Windows and Office monopolies on PCs. European companies have generally been a lot more aggressive about adopting open source, especially where it can replace Microsoft solutions. With the switch to WP7, Nokia will likely push a certain chunk of its customers into the arms of Android and iPhone.

CHALLENGE #4. The shadow relationships between Microsoft and Nokia.
One of the main reasons for Nokia to chose WP 7 over Android is that Microsoft reportedly paid hundreds of millions of dollars to make its mobile OS the primary platform for Nokia smartphones.
Additionally, Elop is a former Microsoft executive, so him siding with his old cronies and acting as a Trojan Horse of Microsoft is no surprise. Also Elop is still a big shareholder in Microsoft so he is deeply vested in helping the company continue to succeed.

OPPORTUNITY #1. Nokia may bring WP7 to “a larger range of price points, market segments and geographies”. Read: not to butt heads with Apple and Android but to make a platform that could be used to substitute the larger market of feature phones.
Now the obstacles are that initially WP7 devices cost as much as Android and iPhone and still required a data plan ($20-$30 more per month than a standard cellphone plan). But if they are overcome in the a few years then WP7 on Nokia could grab a big chunk of market share in the low end of smartphones.

OPPORTUNITY #2 Turn Android platform’s weaknesses into Nokia-Microsoft strengths.
Not a secret that Android has a number of nagging problems right now – platform fragmentation, inconsistent updates and versions across devices, and is becoming slower and clunkier over time. Windows Phone 7 has virtually none of those problems, at least not yet. If buyers start becoming frustrated with Android over these issues WP 7 could become a legitimate alternative. Sure, Nokia and Microsoft will be looking for opportunities like these to jump on and position their devices as a friendlier alternative to Android.

Do you agree and what’re your predictions? Eager to see your opinion.

Thank you,
Helen Boyarchuk
Altabel Group

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