Can Nokia and Microsoft Cross Bridge Over Freezing Waters?

| Feb 15, 2011 | Mobile Device Silicon | Analysts: Avi Greengart, Ron Westfall

Click here

Event Summary

February 11, 2011 – Nokia and Microsoft announced plans to form a broad strategic partnership that would use their complementary strengths and expertise to create a new global mobile ecosystem. Nokia and Microsoft intend to jointly create mobile products and services designed to offer consumers, operators and developers unrivalled choice and opportunity. As each company would focus on its core competencies, the partnership could create the opportunity for rapid time to market execution. Additionally, Nokia and Microsoft plan to work together to integrate key assets and create completely new service offerings, while extending established products and services to new markets.

Quick Take

Analytical Summary

• Current Perspective: Moderate on Nokia adopting Windows Phone 7 as its official mobile operating system (OS), which also includes the planned abandonment of the Symbian and MeeGo mobile OS regimes. With the move, Nokia strikes a bold path and positions itself as a key player in driving a potential third mobile OS and developer ecosystem alternative to the dominant Apple iOS and Android mobile OS and application developer regimes. However alliances of this nature typically fail due in large part to the enormous execution challenges both Nokia and Microsoft face. Nokia is now going from a vendor that built its own operating systems, developer ecosystems, and hardware to becoming relegated as a Finnish hardware manufacturer dependent on the development schedules of an American software company. Microsoft has promised Nokia the ability to modify Windows Phone 7, albeit to an unspecified degree. This distinct understanding conflicts with the Microsoft device group’s core design principle of tightly controlling the user experience and could create development and design friction between the two teams down the line that could very well undermine the long-term success of the partnership.

• Vendor Importance: Very high to Nokia since the company needed to strike bold moves, such as the Microsoft alliance, as part of recently appointed CEO Stephen Elop’s efforts to radically change Nokia’s direction and corporate culture after experiencing declines in key areas over the last several quarters. Nokia’s prior and current path was proving unsustainable, which now includes jettisoning the Symbian OS which was designed a decade ago for a different usage model and stood little chance of success within the evolving touch-based, ecosystem-centric mobile universe, no matter how many touch elements Nokia sought to graft upon Symbian. Microsoft needed to establish the Nokia alliance since the company could ill afford the distinct possibility of becoming a bit player in the mobile computing space. Microsoft has already endured false starts in addressing the mobile OS segment and is already significantly trailing Apple’s iOS and Google’s Android OS platforms in terms of subscriber counts, device partnerships, and market share position. With Windows Phone 7, Nokia wields a credible smartphone message for the first time. The Microsoft relationship also removes the burden on Nokia to compete as a software and services player where Nokia’s investments have yielded little to no results over the last few years.

• Market Impact: High on the overall mobile ecosystem since Nokia continues to command an influential role in the consumer/mobile device market, despite recent declines in handset market share and a recently completed corporate overhaul. For the most part, many of Nokia’s mobile device rivals will tout their ability to support the Microsoft Windows 7 OS according to their customers’ needs as well, thereby undercutting the distinct nature of the Nokia/Microsoft alliance. Many carriers have already bought into Windows Phone 7 as a hedge against Apple and Google, and the partnership could enable Nokia to finally make good on its endless promises to prioritize the U.S. market. This development will compel Nokia’s main consumer/mobile device rivals, such as Apple, HP, HTC, LG, Motorola, Palm, RIM and Samsung to alter their product development and sales and marketing efforts to counter Nokia’s real potential to finally cause upheaval in the smartphone and consumer device arena and alter the mobile ecosystem landscape in terms of creating a robust third mobile OS and developer ecosystem alternative to the Apple iOS and Google Android regimes.

CLIENTS ONLY

Current Perspective

| Client access - Full report in Mobile Device Silicon | More information

Top

Top