[Originally appeared in the gdgt newsletter. Sign up here: gdgt.com/newsletter/ ]
Yes, I know I've been writing about Microsoft a lot lately, but the rumor going around this week that they might be buying Nokia is just too juicy to pass up. A couple of weeks ago, I'd made a few suggestions in the newsletter about some concrete things Microsoft could do to get ahead in mobile, and, while one has already happened (them buying Skype), I didn't suggest that they go out and buy Nokia, mainly because it seemed so unlikely.
Now, I don't have any knowledge one way or the other as to whether the two companies are even talking about a sale (I certainly haven't heard anything concrete about a deal beyond what Eldar Murtazin published the other day), however there's no doubt that a merger between the two companies would be one of the biggest things to ever happen in mobile.
But would it be a good idea? Is there a reason for why Microsoft would buy Nokia when they've already convinced them to adopt Windows Phone as its smartphone OS? I mean, why spend tens of billions of dollars to buy a company that is already committed to using your product? It'd be a bit like Microsoft buying Dell and HP just to keep them using Windows.
The only reason I can really think of to do a deal like this would be if Microsoft feels as if the only way to succeed in mobile would be to have much more control over everything and actually be in the handset business directly. Just look at what Apple has been able to do with its more closed approach -- not to mention what Microsoft's own Xbox division has been able to accomplish by entering the hardware business. Would it really surprise anyone if Microsoft came to the conclusion that there is simply too much at stake here for them to continue with its current direction and that they need to take matters entirely into their own hands? (Note that this is basically the choice that HP has made by buying Palm.) For one thing, the success of Android has boxed them in strategically and is making it difficult for Microsoft to replicate with Windows Phone the success it's had in the PC market (where Windows dominates and is the platform that virtually everyone that isn't Apple uses).
Microsoft knows that it absolutely cannot lose in mobile. This is quite literally an existential challenge for them and right now they are not winning. Almost all of the energy and momentum around tablets is with Apple and Google right now, and, while Windows Phone is in itself impressive and has decent manufacturer and carrier support, adoption rates have been disappointing (Gartner says they only sold about 1.6 million handsets running WP7 in Q1) and it's clear that the OS was really hurt by coming to market so late (though, obviously, better late than never).
Getting Nokia to adopt Windows Phone was a huge win for Microsoft since it guarantees a big boost in the userbase, but I wouldn't be surprised if there wasn't at least some discussion internally about killing those OEM licenses and taking a more Apple-like, end-to-end approach to things. They could certainly just develop and market a Microsoft phone -- Microsoft has a pretty good track record when it comes to doing its own hardware -- but I don't think they have the time anymore. Doing so would take too long to get to any meaningful kind of scale. Buying Nokia wouldn't just be a shortcut to all that. They'd instantly become the biggest seller of phones in the world; combining all of that with Microsoft's acquisition of Skype would create a mobile powerhouse.
Would it be worth the expense and hassle? I honestly don't know. The challenges of combining the two companies would be considerable (the culture clash will be enormous), even if Nokia stays largely independent, and it might be difficult for Microsoft to have a significant enough impact on Nokia's product development for it to make much difference (at least over what Nokia and Microsoft will do under their current partnernship). It could also be that, no matter who owns Nokia, Windows Phone just never gets enough traction in the marketplace. Buying Nokia and severing those relationships with existing Windows Phone OEMs might turn out to be a mistake if those same OEMs sour on Android and are looking for another horse to bet on. And Nokia hasn't exactly been killing it lately. They're still the biggest, but momentum has clearly shifted away from them and it's not guaranteed that it will ever come back. We could be witnessing the company's irreversible decline, which would make buying them a mistake that could very well prove fatal for Microsoft.
Buying Nokia would mean a profoundly different Microsoft, one that would be just as much of a hardware company as it is a software company. That might not be a bad thing. They've already proven with Xbox that they can be successful in the hardware business, and, in the grand scheme of things, drawing those kinds of distinctions would be pointless if Microsoft gets left behind as mobile dominates the future of computing.
I'm not saying that buying Nokia would automatically solve all Microsoft's problems, and given how expensive it'd be they'd basically be betting the company's future on it. But if Microsoft comes to the conclusion that losing the mobile game all but guarantees the company's steady slide into irrelevance AND that the only way to succeed in mobile would be to abandon its current strategy and become a hardware maker, then there is no bet that would be as bold, risky, or gutsy as buying Nokia.
Discussion about
Why would Microsoft buy Nokia?
My thoughts on this are that the "partnership" may have just been a way to test the waters and see how shareholders and the general public reacted. Once it was clear that everyone but Nokia fans seemed to be fairly positive about the notion, maybe they felt like they could leak a rumor about buying Nokia to once again see the reactions. Perhaps the final decision will be based on what kinds of reactions they see.
Microsoft has been fairly gun-shy about taking risks for quite some time, so maybe this little game is their way of mitigating the risk factor to some degree before pulling the trigger on a deal that they aren't entirely confident about.
Can it work? Well, NeXT and Apple managed to merge successfully despite having two very different developer cultures, and now Apple is on top of the world... so I guess anything is possible. I must admit to a healthy dose of skepticism in that regard, though. Maybe this is how Microsoft finally gets to the point of splitting their consumer and business units into two separate companies. If they go that route, I'd say the chances of it working are higher than if they just add to their already bloated corporate mass.
Microsoft has been fairly gun-shy about taking risks for quite some time, so maybe this little game is their way of mitigating the risk factor to some degree before pulling the trigger on a deal that they aren't entirely confident about.
Can it work? Well, NeXT and Apple managed to merge successfully despite having two very different developer cultures, and now Apple is on top of the world... so I guess anything is possible. I must admit to a healthy dose of skepticism in that regard, though. Maybe this is how Microsoft finally gets to the point of splitting their consumer and business units into two separate companies. If they go that route, I'd say the chances of it working are higher than if they just add to their already bloated corporate mass.
Interesting observation. As for the issue of cultural clash, one is bound to overpower the other. In the case of Apple/Next, it was more Steve Jobs reinstating the culture he established in Apple's earlier days (albeit a more mature version). I don't know if that comparison could necessarily apply.
In this case, I would imagine the Microsoft culture dominating but I could just be underestimating Nokia. Either way, everyone has mentioned excellent points concerning the pro's and con's on the issue. In my opinion, it would be unwise to purchase a player that is losing so much traction in the mobile field. Obviously Nokia is having problems executing like they used to, and rightfully so, because the market is vastly different than two years ago. However, I'm unfamiliar with the true financial risk for Microsoft, but it would definitely be something interesting that I would like to see.
In this case, I would imagine the Microsoft culture dominating but I could just be underestimating Nokia. Either way, everyone has mentioned excellent points concerning the pro's and con's on the issue. In my opinion, it would be unwise to purchase a player that is losing so much traction in the mobile field. Obviously Nokia is having problems executing like they used to, and rightfully so, because the market is vastly different than two years ago. However, I'm unfamiliar with the true financial risk for Microsoft, but it would definitely be something interesting that I would like to see.
Interesting point about Microsoft. I completely agree that a consumer/business products divide would help the company.
They'd lose some 'synergy' but they'd more than make up for it with greater focus, agility and (hopefully) decreased infighting between business and consumer-minded executives.
They'd lose some 'synergy' but they'd more than make up for it with greater focus, agility and (hopefully) decreased infighting between business and consumer-minded executives.
Microsoft needs a change in management. Ballmer is obsessed with Google, not with making great, forward-thinking products. The current state of Microsoft is doomed to fail. It blows my mind that Ballmer still thinks Windows 8 on ARM is the answer to the ipad and Honeycomb tablets. The fact that HP will ship a tablet with their own OS before the Microsoft behemoth has shown anything competitive is indicative of the problems they are facing.
There is nothing inherently wrong with Windows 7 phones. Everyone I know who has one loves them. Many of those same people also owned Zune HD's, and they loved those as well. Microsoft doesn't have a hardware problem with Windows 7 phones, nor a software problem, nor a channel problem, nor an OEM problem. There's nothing about the phone itself that needs to be fixed before it can be successful.
What Microsoft does have is a marketing problem. There is absolutely NO consumer demand for a Windows 7 phone. Buying Nokia would do nothing to solve that problem and would be a complete waste of resources. What they need instead is a plan for building interest and excitement around their current, very competitive, product.
There are some short term fixes that might help: Find any excuse to give the phones away. Give every attendee at their next sponsored event a free, unlocked phone. Trade-in your old iPhone and get a free Windows 7 phone. Buy an Xbox and get a $200 rebate on a Windows 7 phone. Buy the latest Call of Duty and get a $100 credit at the App Store. That sort of thing.
The Xbox isn't successful because Microsoft manufactures it in-house. It's successful because it's a kick-ass gaming system that every serious gamer HAS to have. Microsoft needs to build that same sort of perception around the Windows 7 phone, and until they do, nothing else really matters.
What Microsoft does have is a marketing problem. There is absolutely NO consumer demand for a Windows 7 phone. Buying Nokia would do nothing to solve that problem and would be a complete waste of resources. What they need instead is a plan for building interest and excitement around their current, very competitive, product.
There are some short term fixes that might help: Find any excuse to give the phones away. Give every attendee at their next sponsored event a free, unlocked phone. Trade-in your old iPhone and get a free Windows 7 phone. Buy an Xbox and get a $200 rebate on a Windows 7 phone. Buy the latest Call of Duty and get a $100 credit at the App Store. That sort of thing.
The Xbox isn't successful because Microsoft manufactures it in-house. It's successful because it's a kick-ass gaming system that every serious gamer HAS to have. Microsoft needs to build that same sort of perception around the Windows 7 phone, and until they do, nothing else really matters.
Customer demand would be elevated by having hardware that was differentiated. If you look down the lineup of phones at your carrier of choice, it is nearly impossible to tell the difference between a Windows Phone and an Android phone until you turn the screen on.
If they teamed up with Nokia to design some premium hardware to really stand out in a lineup. This plus a little marketing magic, like you suggest, could help move it to be the kick-ass phone that everyone HAS to have.
If they teamed up with Nokia to design some premium hardware to really stand out in a lineup. This plus a little marketing magic, like you suggest, could help move it to be the kick-ass phone that everyone HAS to have.
There are a number of elements which are wrong with WP7 phones, I have the HD7 and the whole feel of the OS is that it's light-weight and unresponsive (once you go past the home screen) you end up spending most of your time looking at dots.
There's hardly any key apps and overall compared to iOS / Android it has the feel of being a couple of generations behind. There's a lot of work to be one on the OS before it becomes relevant.
There's hardly any key apps and overall compared to iOS / Android it has the feel of being a couple of generations behind. There's a lot of work to be one on the OS before it becomes relevant.
I'd love it if they bought Sprint too. Control the entire chain. Sprint could still sell other manufacture phones, but this would allow Microsoft to one-up Google on the "Google Experience" phones by including wireless coverage & data in the package.
And I say this as a 12 year Sprint customer, rocking the Arrive. I'd love a thinner phone than the Arrive (I hardly use the hardware keyboard) as well, so Nokia is very interesting to me.
And I say this as a 12 year Sprint customer, rocking the Arrive. I'd love a thinner phone than the Arrive (I hardly use the hardware keyboard) as well, so Nokia is very interesting to me.
Really interesting idea. Personally I'd rather see Google buy Sprint, as I think they would be more innovative with their new-found capabilities, but yeah...
On the other hand, joining a new market as a competitor is an easy way to make enemies. Getting into competition with other network access providers might be similar to opening up a second front in a war -- not generally a good idea.
On the other hand, joining a new market as a competitor is an easy way to make enemies. Getting into competition with other network access providers might be similar to opening up a second front in a war -- not generally a good idea.
I'd hate to see that happen. I don't want a Microsoft phone; I'd prefer to have one on a more open platform like Android. I like dealing with Sprint because they are less evil than the remaining major alternatives (Verizon and AT&T); if Microsoft were to gobble up Sprint there would be no remaining alternative for an open platform phone if the T-Mobile acquisition is allowed to go through.
To answer JPB, I don't want to see Google buy Sprint either. The problem is that would be the death of Google as a carrier-agnostic independent platform; if Google were to buy a telecomm carrier then other carriers would be reluctant to offer their products.
But then I generally consider integration to be bad. It leads to less consumer choice, and to the use of monopoly power in one area to extend power in another. I don't want my phone company in the equipment business OR in the content business (which means that NBC Comcast is a VERY bad idea but that's a subject for another discussion).
To answer JPB, I don't want to see Google buy Sprint either. The problem is that would be the death of Google as a carrier-agnostic independent platform; if Google were to buy a telecomm carrier then other carriers would be reluctant to offer their products.
But then I generally consider integration to be bad. It leads to less consumer choice, and to the use of monopoly power in one area to extend power in another. I don't want my phone company in the equipment business OR in the content business (which means that NBC Comcast is a VERY bad idea but that's a subject for another discussion).
I think you made a great point about why would Microsoft buy them if they have already agreed to build phones for their operating system. You also stated that Nokia doesn't have the momentum that other phone makers do, so Microsoft would also be taking that on if they buy them. If WP7 fails then Nokia would fail too, making for a much bigger impact on Microsoft if they owned Nokia.
I think the example of how well Apple is doing would be a great inspiration for Microsoft, but lets not forget that Nokia also had their own OS and made the hardware for it, and that isn't turning out well. We can also look at Palm, who made a fantastic mobile OS, and they also didn't thrive. Sure they were bought by HP but that hasn't changed the fact that webOS is a great OS that isn't used.
I just see way too much risk for Microsoft, and not enough upside for them. I think right now they have a lock on user's experience no matter what WP7 they buy, and at the same time give their customers choice when they are buying a handset.
I think the example of how well Apple is doing would be a great inspiration for Microsoft, but lets not forget that Nokia also had their own OS and made the hardware for it, and that isn't turning out well. We can also look at Palm, who made a fantastic mobile OS, and they also didn't thrive. Sure they were bought by HP but that hasn't changed the fact that webOS is a great OS that isn't used.
I just see way too much risk for Microsoft, and not enough upside for them. I think right now they have a lock on user's experience no matter what WP7 they buy, and at the same time give their customers choice when they are buying a handset.
What Nokia has that others don't have is a probably the biggest manufacturer in normal phones (Dumb phones). Throw a light version of windows phone 7 on there and boom. Also buying Nokia means they can call the shots and it actually builds a versatile portfolio for Microsoft, what they have currently is:
Microsoft Windows 7 & Office with Live, X-Box 360, Zune Software (Now integrated into Phone 7) and Skype. And if they buy Nokia they have their own phone company. Other stuff they get with Nokia is their Booklet 3G, which could get them into the Manufacturing PC Game over distribution.
I mean when business people or whatever walk into a PC store they can see a Microsoft Booklet 3G with the office suite and 3G. I mean this is more of a gain for them if they play it in the long run as if they want to sell premium laptops like this year the offer a Free X-box for back to school. If they own Nokia and want to go all out: Buy a Premium laptop one summer and you can receive a Free X-box and Microsoft phone on contract. Remember Windows Phone 7 has Zune.
All devices can have Skype (Windows 7 have it built in, Kinect, Proper video conferencing on Windows Phone 7). And already you will have users locked into their Experience and if they get it right it will really challenge Apple as the reason why users keep upgrading Mac after Mac, iPhone 3G to iPhone 4 is because they are locked into the Apple experience (Mac, iPad, iPhone, iPod, Cloud services)
I mean with this move if they buy Nokia I could totally see them doing the "experience route" From Desktops to Laptops and to Mobile right down to their music service.
Then again the big question is: Does Nokia want to be bought by Microsoft?
Microsoft Windows 7 & Office with Live, X-Box 360, Zune Software (Now integrated into Phone 7) and Skype. And if they buy Nokia they have their own phone company. Other stuff they get with Nokia is their Booklet 3G, which could get them into the Manufacturing PC Game over distribution.
I mean when business people or whatever walk into a PC store they can see a Microsoft Booklet 3G with the office suite and 3G. I mean this is more of a gain for them if they play it in the long run as if they want to sell premium laptops like this year the offer a Free X-box for back to school. If they own Nokia and want to go all out: Buy a Premium laptop one summer and you can receive a Free X-box and Microsoft phone on contract. Remember Windows Phone 7 has Zune.
All devices can have Skype (Windows 7 have it built in, Kinect, Proper video conferencing on Windows Phone 7). And already you will have users locked into their Experience and if they get it right it will really challenge Apple as the reason why users keep upgrading Mac after Mac, iPhone 3G to iPhone 4 is because they are locked into the Apple experience (Mac, iPad, iPhone, iPod, Cloud services)
I mean with this move if they buy Nokia I could totally see them doing the "experience route" From Desktops to Laptops and to Mobile right down to their music service.
Then again the big question is: Does Nokia want to be bought by Microsoft?
"Windows Phone is in itself impressive and has decent manufacturer and carrier support"
I wonder if that's really the case. I haven't seen all that many in the shops and none "in the wild" (here in the UK at least). I'm not convinced that most WP7 phones are little more than a means for manufactures to not be sued by Microsoft over Android, devices that are only rolled out at CES and MWC and then promptly returned to the closet until next year.
As for Microsoft buying Nokia (or at least a part if it), I think it makes sense, assuming Microsoft are going to press on with Windows Phone. Maybe they should only buy the smartphone side of the business though, with the dumbphone business either staying with a smaller Nokia or sold off to some far east manufacturer looking to licence a globally recognized name.
I'm not convinced that mobile really is existential to Microsoft - they could just accept that they lost when it comes to being the platform provider, move on and start charging Android and iOS users for mobile versions of Office, "the best" Exchange and Sharepoint integration and XBox branded games. Sure, it's embarrassing to lose a platform war and end up being somebody else's third party, but you can still continue to exist (just ask Sega)
I wonder if that's really the case. I haven't seen all that many in the shops and none "in the wild" (here in the UK at least). I'm not convinced that most WP7 phones are little more than a means for manufactures to not be sued by Microsoft over Android, devices that are only rolled out at CES and MWC and then promptly returned to the closet until next year.
As for Microsoft buying Nokia (or at least a part if it), I think it makes sense, assuming Microsoft are going to press on with Windows Phone. Maybe they should only buy the smartphone side of the business though, with the dumbphone business either staying with a smaller Nokia or sold off to some far east manufacturer looking to licence a globally recognized name.
I'm not convinced that mobile really is existential to Microsoft - they could just accept that they lost when it comes to being the platform provider, move on and start charging Android and iOS users for mobile versions of Office, "the best" Exchange and Sharepoint integration and XBox branded games. Sure, it's embarrassing to lose a platform war and end up being somebody else's third party, but you can still continue to exist (just ask Sega)
I can imagine one other reason for this -- that Nokia is in worse financial shape than they let on, and Microsoft feels that Nokia needs access to MS's capital to stay afloat long enough to have them establish a significant Windows Phone 7 presence.
I don't think Microsoft can succeed with its present strategy. There just isn't room in the mobile space for another consumer-oriented OS. (WebOS isn't going to make a significant dent in the phone market for the same reason, though it might still get some traction in tablets.) The market has already chosen the winners; they are Apple and Google. If Microsoft wants to be relevant in mobile they have two choices: abandon the OS and concentrate on mobile apps, or retarget their OS toward enterprise users, where they could offer integration with their Windows servers and desktop applications as their selling point.
I don't think Microsoft can succeed with its present strategy. There just isn't room in the mobile space for another consumer-oriented OS. (WebOS isn't going to make a significant dent in the phone market for the same reason, though it might still get some traction in tablets.) The market has already chosen the winners; they are Apple and Google. If Microsoft wants to be relevant in mobile they have two choices: abandon the OS and concentrate on mobile apps, or retarget their OS toward enterprise users, where they could offer integration with their Windows servers and desktop applications as their selling point.
I don't understand why they need to own Nokia for this. They could license any vendor to make Microsoft branded handsets. The reason Android succeeded was they took the approach Microsoft did back in the early days of the pc. The Apple approach of owning the experience is great for a small share of the market. The winner is always choice. Microsoft needs to invest more into updating the software more quickly.
Microsoft acquiring Nokia outright is an interesting thought experiment but I don't see it happening. Quite aside from not being able to answer the age old question of why buy the cow when you can get the milk for free, or in this case why buy the handset manufacturer when it is already committed to buying your operating system and has basically bet the farm (wow, my metaphors are really starting to blur and fall apart now) by doing so, Nokia is a huge and fairly diverse company.
Acquiring Nokia would be nothing like HP buying Palm, that was a large and somewhat diverse company buying a tiny mobile OS company that had some experience making hardware. Nokia isn't just a company that makes those smartphones that Microsoft has already struck a deal to be on, or that has the nice maps service that Microsoft appears to be getting with that deal, Nokia makes insane amounts of phones that Microsoft would have more or less no interest in not to mention the infrastructure joint venture with Siemens.
It could be that Microsoft is interested in taking a more hands on approach to all facets of the mobile industry but it has always been the company's modus operandi to only get into hardware if absolutely necessary and with the giant deal with Nokia already in place it doesn't seem necessary in the least. Perhaps it could lead to both companies innovating quicker in the cut throat mobile market with highly integrated MSN (MicrosoftNokia) software and hardware but I'd expect to see a dedicated joint venture to that effect before an all out acquisition.
Acquiring Nokia would be nothing like HP buying Palm, that was a large and somewhat diverse company buying a tiny mobile OS company that had some experience making hardware. Nokia isn't just a company that makes those smartphones that Microsoft has already struck a deal to be on, or that has the nice maps service that Microsoft appears to be getting with that deal, Nokia makes insane amounts of phones that Microsoft would have more or less no interest in not to mention the infrastructure joint venture with Siemens.
It could be that Microsoft is interested in taking a more hands on approach to all facets of the mobile industry but it has always been the company's modus operandi to only get into hardware if absolutely necessary and with the giant deal with Nokia already in place it doesn't seem necessary in the least. Perhaps it could lead to both companies innovating quicker in the cut throat mobile market with highly integrated MSN (MicrosoftNokia) software and hardware but I'd expect to see a dedicated joint venture to that effect before an all out acquisition.
I don't see how it would be a terrible thing. It appears that the hardware that Microsoft does have control over (Xbox, keyboards, mice, etc) is generally pretty good and I would say is on-par with something Apple does. It may be important to have a good reference phone provided by Microsoft kind of like their new Windows Experience from their Microsoft store. I would be a good way to show off what a premium experience is I suppose. Maybe having a hardware division to make something like an MP3 player/gaming console like the iPod Touch/Nintendo DS/Sony PSP wouldn't be a bad thing.
One possible future:
1) Microsoft buys Nokia, transforming into a more vertically integrated hardware/software company (more like Apple)
2) As Mobile continues to grow other segments such as the conventional desktop market begin to decline (in the face of tablets, chrome OS and maybe even other linux distros)
3) Other hardware companies, traditional allies of Microsoft, begin to see them as a direct competitor (as mobile becomes more important to everyone's bottom line) and look to a third solution.... probably Google's solution
4) We are left with Apple, Microsoft and maybe HP going the full integration route, and everyone else using Google's open platforms (Android and Chrome OS). Web-based apps (and the SAAS model in general) see a big boost due to OS fragmentation and the difficulties of implementing on so many platforms.
If Google becomes the go-to software partner for out-of-house development, this is good for them. Also, if more and more stuff happens on the web, this is good for them. Meanwhile vertically integrated hardware players take advantage of higher margins as they target the upper-end of the market (If there's enough space in the market for 3...). Everyone else plays the hardware game (Companies like HTC and, to a lesser extent, Motorola have shown that there's good profit to be had).
In this scenario the biggest challenge for Microsoft will be maintaining relevance in a web-based-software world. Their buddy-buddy relationship with Facebook may save them, or a compelling online office suite product (they're making steps in the right direction) may help, but they should also be looking to bolster their media sales and distribution products.
One final area where this battle for dominance will play out: Accessories. AAPL has a strong lead here with a standard dock connector, AirPlay and made-for-iPhone and made-for-iPod lines, and we saw at I/O that Google is focusing heavily on this area for the coming year. Microsoft, meanwhile, has been relatively quiet. (Nokia too.) If they don't actively foster an accessory ecosystem (or if they get greedy and try to do it all in-house) they will fail.
JP
1) Microsoft buys Nokia, transforming into a more vertically integrated hardware/software company (more like Apple)
2) As Mobile continues to grow other segments such as the conventional desktop market begin to decline (in the face of tablets, chrome OS and maybe even other linux distros)
3) Other hardware companies, traditional allies of Microsoft, begin to see them as a direct competitor (as mobile becomes more important to everyone's bottom line) and look to a third solution.... probably Google's solution
4) We are left with Apple, Microsoft and maybe HP going the full integration route, and everyone else using Google's open platforms (Android and Chrome OS). Web-based apps (and the SAAS model in general) see a big boost due to OS fragmentation and the difficulties of implementing on so many platforms.
If Google becomes the go-to software partner for out-of-house development, this is good for them. Also, if more and more stuff happens on the web, this is good for them. Meanwhile vertically integrated hardware players take advantage of higher margins as they target the upper-end of the market (If there's enough space in the market for 3...). Everyone else plays the hardware game (Companies like HTC and, to a lesser extent, Motorola have shown that there's good profit to be had).
In this scenario the biggest challenge for Microsoft will be maintaining relevance in a web-based-software world. Their buddy-buddy relationship with Facebook may save them, or a compelling online office suite product (they're making steps in the right direction) may help, but they should also be looking to bolster their media sales and distribution products.
One final area where this battle for dominance will play out: Accessories. AAPL has a strong lead here with a standard dock connector, AirPlay and made-for-iPhone and made-for-iPod lines, and we saw at I/O that Google is focusing heavily on this area for the coming year. Microsoft, meanwhile, has been relatively quiet. (Nokia too.) If they don't actively foster an accessory ecosystem (or if they get greedy and try to do it all in-house) they will fail.
JP
It seems like a good idea to me.
Apple have clearly succeeded in their fully closed system, yet Microsoft's strategy of limiting OEMs seems to have only succeeded in limiting the hardware (to be less competitive spec-wise (which I know isn't everything, but it helps) with the top hardware in the market). It is still evidently difficult for Microsoft to push updates and their supposed benefit of not fragmenting apps is kinda irrelevant as Android has proven: the spec gap wouldn't be huge enough to stop most apps from working and hence developers developing for the platform....
What seemed like a good hybrid at the start, now just looks to have taken the worst from both worlds: The limiting of devices (as with Apple's system) and the poor updating of Android. Taking over the whole ecosystem would put Microsoft into a position where everybody who owns a Windows computer (which is everybody), would be in a very good position with something like the Zune software to buy a Windows Phone Device, unlike with iTunes which is just a frustrating experience.
Microsoft have proven that they are willing to sink a lot of cash into WP (paying developers so that they will build apps!), but are they willing to risk $40 billion....
Apple have clearly succeeded in their fully closed system, yet Microsoft's strategy of limiting OEMs seems to have only succeeded in limiting the hardware (to be less competitive spec-wise (which I know isn't everything, but it helps) with the top hardware in the market). It is still evidently difficult for Microsoft to push updates and their supposed benefit of not fragmenting apps is kinda irrelevant as Android has proven: the spec gap wouldn't be huge enough to stop most apps from working and hence developers developing for the platform....
What seemed like a good hybrid at the start, now just looks to have taken the worst from both worlds: The limiting of devices (as with Apple's system) and the poor updating of Android. Taking over the whole ecosystem would put Microsoft into a position where everybody who owns a Windows computer (which is everybody), would be in a very good position with something like the Zune software to buy a Windows Phone Device, unlike with iTunes which is just a frustrating experience.
Microsoft have proven that they are willing to sink a lot of cash into WP (paying developers so that they will build apps!), but are they willing to risk $40 billion....
I've personally never cared much about neither Microsoft nor Nokia - They may be (soon have been?) the worlds largest in their respective area, but they both seem to be on the starting line while everyone else has been running for quite a while. Being alone on the starting line, or teamin up with another guy at the same position doesn't make it any easier to finish first.
I don't see how the benefits outweigh the costs. They'd have to overpay (Nokia would want a premium for giving up it's independence) and in the end, what does that get you. Not much more than what you are ready have with the partnership. Also Peter, you indicated that it was better late than never. I would disagree. I think late is often times worse than never and I think this is one of those times. Apple, Android and Blackberry are entrenched players and have leadership positions in segments. What segment will WinPhone 7 have the chance to be a leader in? 3 years ago yes, before Android became such a player. If I were Microsoft, I'd be forward looking. Now it seems like they will now be a minor player in the tablet market. Maybe they should build their own tablet, based on a version of WinPhone 7 while there's still room for a leadership position, although again, time is passing them by.
When you say that late is often time worse than never, what alternative strategy for mobile would you have proposed for Microsoft? If you're arguing that they shouldn't have revamped Windows Mobile and introduced a new OS, what else should they have done? I think it's definitely worth exploring, am curious what you think they should have done instead with respect to mobile.
My strategy isn't fully thought out but I think MS should have had more of a "mobile" strategy than phone, per se. That may be just a matter of semantics and WinPhone will morph into WinMobile and we end up in the same place. Although it seems like they will be late again to the tablet market with a via product. Again Apple, Android and Blackberry at least have via products in tablets, unlike MS. This segment is still forming so it's not too late to gain a dominant position. Seems like it would be very damaging to be late to both segments. It's certainly possible that Blackberry will slide and MS could emerge more dominant, especially in tablets.
p.s. at some point could you comment on what the heck HP is doing with the Palm acquisition. Has any product come to market?
p.s. at some point could you comment on what the heck HP is doing with the Palm acquisition. Has any product come to market?
The lack of a hardware division is hurting MS. Microsoft's partners are racing to build the cheapest PC supplemented by crapware and are not designing for good customer experiences. Apple and MS are constantly being compared in the media so when either release a new desirable thing, Apple's thing runs on a beautiful hardware to show it off and MS's thing runs on a plastic shard designed by a partner.
Nokia could help out here and be the premium brand that MS needs to not look silly when they launch a new product. Laptops, Tablets, Smartphones, Handhelds, and Gaming Systems; they could set the high watermark for their other partners to aim for.
Nokia could help out here and be the premium brand that MS needs to not look silly when they launch a new product. Laptops, Tablets, Smartphones, Handhelds, and Gaming Systems; they could set the high watermark for their other partners to aim for.
Hmm...it'd be interesting for Microsoft to buy Nokia but at the same time, like you pointed out, it might be pointless since Nokia's already dedicated to making WP7 devices. That said, I think Microsoft has a pretty good chance of getting some marketshare AND mindshare with Nokia in their team since Nokia is a huge powerhouse in Europe and Asia. Even though Microsoft and Nokia might not start picking up users in N. America I think they'd definitely start making headway in Europe and Asia just because people there are more inclined to stick with the same manufacturer. Once the Europian and Asian takeover is done, influence might start to spread across the Atlantic and Pacific over to the grand old United States of America.
Microsoft needs to be more like Apple. If it makes its own hardware, not only all the drivers and compatibility would work out well, but when they advertise, they can talk about hardware. Also, they can custom build hardware to work specifically with features they are working on, like Apple does with multi-touch. This isn't as true with the mobile market as it is true with the computer market. Microsoft needs to buy a PC maker, even a small one like Tri-Gem, and get them to custom build hardware for Microsoft. This would make hardware on Windows as great as Apple's, and Microsoft could truly overtake Apple.
I think that Microsoft might actually end up buying/merging Nokia, but I suspect that it will only happen after a couple of handsets are out on the market.
Whenever there is an acquisition/merger the hardest part is to get the people on either side to adjust to the new reality and become productive again, and then realize any synergy that was "planned".
Microsoft and Nokia seem to be doing the adjustment and (attempting to) create the synergy _now_.
I can see how a year or two from now, to "achiever greater focus" and "realize greater synergy" Microsoft could end up buying Nokia's handset business.
After all, Nokia is already offloading or splitting all non handset business...
Whenever there is an acquisition/merger the hardest part is to get the people on either side to adjust to the new reality and become productive again, and then realize any synergy that was "planned".
Microsoft and Nokia seem to be doing the adjustment and (attempting to) create the synergy _now_.
I can see how a year or two from now, to "achiever greater focus" and "realize greater synergy" Microsoft could end up buying Nokia's handset business.
After all, Nokia is already offloading or splitting all non handset business...
Microsoft needs to focus on the software, the hardware is pretty much commoditized (see all the Android clones). If they don't get the software right, there won't be any point in having the mobile hardware.
You're right about this being an existential challenge for Microsoft in terms of having the dominant consumer OS, but they will remain strong in consoles / servers / business apps even if they lose that battle, for some time.
You're right about this being an existential challenge for Microsoft in terms of having the dominant consumer OS, but they will remain strong in consoles / servers / business apps even if they lose that battle, for some time.
Considering the restrictions that Microsoft has put in place regarding customization of the OS I don't see many meaningful ways that a hardware company can differentiate their product from other manufacturers. Either Microsoft will have to buy Nokia and go it alone or open up the OS to customizations. Either way I'm not convinced that Microsoft has made a compelling case beyond Xbox users to switch to Windows Phone 7.
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