Industry reaction to Nokia and Microsoft announcement

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Stephen Elop and Steve Ballmer have shaken hands on it but reaction is mixed; some think this can propel Nokia back to the top but others suggest this move comes too late

PWC UK technology leader Jass Sarai

My initial thoughts are “great Nokia has done something because it needed to” , however it’s too early to tell whether this will make or break Nokia’s decline in market share but, as with all good partnerships, if both are really committed to it then they should make progress.

Its great that Stephen Elop is from Microsoft, because if you are getting into a partnership it’s better that you get into a partnership that you know very well. My thought on this is: “Hopefully this partnership is more like an ‘Ant and Dec’ partnership rather than a ‘Katie Price and Peter Andre’ one.

The analogy is that partnerships really work really well or they wither and die but in this case I think it will be an ‘Ant and Dec’ partnership, because both companies would have thought long and hard about why they are partnering and I think both have tried to do what they are doing on their own, so they really need each other.

I think that need will drive them to do the right thing to be market leaders. Both have come from a position where they see themselves as market leaders. Both like being market leaders and both see their position as a threat, so both see this as business critical.

The only phone manufacturer that has really taken the market by storm is Apple and that’s about consumer preference and I would say consumers can be quite fickle. Its about having the best product and somewhat about having the best marketing and I think if Nokia can drive innovation at a quicker pace than everybody else, then they can get back the ground they have lost.

You also have to think about the amount of potential cross selling that could come from this partnership. Yes Nokia is getting into a partnership for a device and a platform but think what else is potentially there?

Think about Nokia producing a tablet -what software is that going to run? Think about Nokia maybe producing a laptop – what software would you run on that?

Equally if Microsoft is getting into developing countries and they were thinking about devices where would that go?

The other important thing here is LTE and 4G. There is a lot of talk about the emerging markets, but think of a developed market. The US for example is going to be at the forefront. What is going to happen there? Could that be an opportunity for this partnership to really flourish initially?

In terms of the market they are in – there are lots of opportunities for Nokia and Microsoft. I think what you are seeing is that when people talk about ‘lost ground’ – this is lost ground in the world we live in today. But tomorrows world is 4G and LTE, so if you are deriving innovation ready for that world, you can make a change.

Things in this industry move so quickly as well. We are expecting an iPad 2 by Spring and an iPhone model number five is not that far down the road, so if Nokia can make two or three steps forward they can really be back at the top.

The other thing about this is that consumerization is all about hype. What you see here are two big names coming together and that creates some hype and expectation. If you can deliver on this hype and expectation then you have got a real opportunity.

Only time will tell if this was the wrong choice and Nokia should have in fact gone with Android. No one has a crystal ball. You have something with this deal that looks and smells and feels like the right answer. Now its about them having that full commitment and having great execution. Both have got great history in delivering both, so why wouldn’t you expect it to be a success?

I think a year from now, I would expect Nokia to focus on fewer handsets, but more world class leading handsets. Nokia has historically had a lot of handsets, I could see them saying “this particular handset is our number one” and really driving that one market leading handset in the future.

Coleago senior consultant Robert Filkins:

“Nokia is between a rock and a hard place. None of its decisions are terribly appealing. It’s current operating systems for smartphones is not really going anywhere – Symbian is looking dated and MeeGo is proving to be problematic. It had to do something and this is the obvious solution.

“I don’t think its going to be a huge success though. It’s going to ‘sort of work’ but I don’t think its going to necessarily save Nokia’s market leading position. It will have some success with it in North America, and some other markets. In the rest of the world, the jury is out.

“One of the problems of Windows 7 is that its a fairly new operating system. Its not terribly mature yet, its going to take a couple of years before it becomes successful. Windows Mobile 7 relies on the Microsoft App store, it also relies on Bing, and the Xbox store. Looking at those features and capabilities, although they are available in the US at the moment, their availability in the rest of the world is really very patchy. There are some countries where they are not really available at all. So if you had Windows Phone 7 in say India, half of the features are not going to work.

“Its not going to be a ticket back to the top. There is just too much competition from Apple and Android. The market has changed completely. It is being squeezed at both ends. At the low end it is being squeezed by cheap Chinese manufacturers and at the top end are being squeezed by some better products like iPhones and Android products and to some extent BlackBerry handsets. HP has just announced two new handsets with webOS which is a development of the Palm operating system, providing yet more competition in the smartphone market.

“Microsoft is traditionally slow at development. Its not an organisation that is terribly responsive to the market. Android is much faster moving, so I think it is going to have difficulty keeping up with that. I don’t think it will be the end of Nokia, whether it is going to continue a slow decline or whether it is going to hang on there, I am not sure. I think the quality of its hardware design is something it really does need to focus on because that is its major strength in the handset market. It has got a very big loyal following so it will hang on but it depends what it comes up with over the next 12 months.”

Informa Telecoms and Media principal analyst David McQueen

This is a “make-or-break” strategy by both Microsoft and Nokia. Yes, the two companies are the most known brands in the consumer electronics, yes they have complementary strengths and bringing these strengths together could help them create a strong ecosystem, yes both companies want to be friendly to mobile operators and seeking to use them as the main channel to consumers. Yes both companies have an incredible marketing budgets and resources and the combination of their efforts is likely to strengthen the image of both brands. All these assets could enable the two companies to change the landscape of mobile converged devices in the future.

There is no question that this partnership will provide scale for Microsoft which has been struggling in the mobile world since the beginning and will offer more competition, which will benefit operators (more options in terms of platforms).

However, this may not be the best move for Nokia and it is questionable how ‘open’ Microsoft will be to work with. Even if Nokia fear Google’s dominance, an open platform like Android would allow much more possibilities to Nokia.

Also, two losers don’t make a winner, particularly given their scale and cultural differences. It’s hard enough for massive companies to innovate on their own much less with another massive partner with a completely different culture. Whether Steve Ballmer and Elop can be the white knights that the operators are looking for will depend largely on the ability for Nokia and Microsoft to execute their partnership effectively.

The corridors of power within the operator community will be echoing to the cries of “at last”. Vodafone, Telefonica, Deutsche Telekom and many other operator peers had all been waiting for a credible challenge to the apparent hegemony of Google and Apple in the smartphone space. They’ll be especially pleased by both the reference to the importance of operator billing in driving uptake of applications downloads as well as the promise of a new force in the enterprise device and services space to reduce dependency on RIM’s dominant Blackberry platform.

What is more, the more competition there is in the smartphone space, the greater the innovation, the better the devices that emerge and therefore the easier it is for operators to convert users to upgrading to dataplans. But while operators might view the MS-Nokia tie up as a net positive, ultimately it will be users who choose what phones they want to buy. That’s why we have to expect Nokia and Microsoft to match their bold move by making bold marketing investments to fund sell-through efforts via the operators’ retail channels.

Whilst Windows Phone 7 will offer Nokia access to MS software expertise and help it crack the US market, however the problem with Windows Phone 7 is that it currently commands high build costs so will only compete at the top end of the smartphone market. This will put pressure on the Symbian and MeeGo platforms until such time as cost and prices has been driven down to complete with the likes of Android in lower smartphone tiers, a key segment for Nokia. The transition from Symbian to Microsoft will take time, and in this fast-moving sector of the handsets market, time is a scarce commodity.

Nokia software has a different DNA to Windows Phone: ditching existing software based on open-source to adopt a closed environment such as Windows phone means completely changing Nokia software DNA and this is not going to happen overnight. Drilling out cost and ramping volume to create a buoyant profitable ecosystem may take time, and Nokia scale will help MS to bring prices down although Android managed to do it in just over a year.

The decision not to go with Android is an interesting one, with Elop citing the platform as being too commoditised/ democratised and difficult to create differentiation and good margins. By Elop saying that it is now a three-horse race just doesn’t add up – MS, Android, Apple and Blackberry equals 4.

It will be interesting to see how Microsoft partners like HTC, Samsung, LG react to this partnership. Bear in mind these players walked away from Symbian because of Nokia’s ambitions to control this ecosystem. Although Microsoft is winning a strong partner it could lose many others, particularly in the US.

Next Communications managing director Mark Finlayson:

“Microsoft has no real traction in the mobile market and an organisation that has failed there, teaming up with Nokia, another organisation that doesn’t have any traction in our industry either and is also a completely failed business too. Nokia is clutching at straws because it is looking for help from a company that doesn’t have a reputation in mobile. Nokia should have got into bed with Android because it could have rolled it out with real market penetration straight away because Android will probably be the biggest smartphone platform very soon.

“It’s taken Nokia three years not to respond to the Apple iPhone and this move probably comes too late for it as it could take up to a year to get a Windows Phones 7 product to market, by which time it will have a close to zero percentage share of the smartphone market.”

Expansys chief executive Anthony Catterson:

“It’s great news for retailers and customers. Nokia is the biggest device manufacturer in the world as it builds fabulous devices which customers understand and want to upgrade on. If you combine that with a more open-plan operating system that gives publishers and customers more flexibility, which Windows Phone 7 does in a far better way than Symbian, then that can only benefit Nokia and Microsoft.

“Nokia has needed stronger device partners and a more flexible operating system. I think this serves both companies and their respective customers incredibly well. I look forward to the competition between that combination proposition and what we are going to see from Apple, Android and its partners. The one that might have to step its game upwill probably have to be BlackBerry, which has done a great job over the last 18 months and will now have to evolve again to ensure it is at the top when consumers make their decisions.”

Fone Doctors proprietor Faisal Sheikh:

“It’s a positive move. However it’s a poor decision to hang on with Symbian and MeeGo. Nokia could have been more ruthless, getting rid of both of these and teaming up Windows Phone 7 or even Android also. I don’t think it has gone far enough. It would have instilled more confidence if it had admitted it has made a lot of terrible mistakes and totally dismissed Symbian and MeeGo and putting everything behind Windows Phone 7, which would have shown a real commitment. Nokia should also have kept the Android window open.

“However this is still beneficial for both parties. It’s good move for Microsoft because now it can gain even more traction in the mobile market. Nokia still has the best hardware on the market and it now has software that people are taking notice of so from an innovation point of view this move makes sense. Android may be slightly ahead of Windows Phone 7 but I think the latter is definitely here to stay.”

Christian Lindholm, partner and director at service design agency Fjord:

“This will be a considerable relief for all developers as it will answer the question of which is the third platform to expand to. We have had this question multiple times in the past months, and there has not been a clear answer. Now it is clear – it is Windows.

“The developer angle is incredibly important and the big guys have made life much more simple for developers and that is what matters. Only if these giants serve the developer community will they get a chance to prosper themselves. The game has changed.”

Outsourcery chief technology officer Mark Seeman:

“From a business perspective, both Microsoft and Nokia have been historically strong but their market shares have weakened lately. RIM’s BlackBerry devices have seen continued success within the business market, Apple and Google’s market share continues to grow and Microsoft’s excellent new Windows Phone 7 operating system should bring it back into the game.  For Nokia to compete it is going to need to dramatically up its game and it can only achieve this with a monumental change to its organisation.  Nokia chief executive Stephen Elop’s message to his staff was a public recognition of this fact.”

TMTI chief executive Crispin Thomas:

“Nokia had to do something in order to arrest its decline, but it does surprise me it has gone to Windows Phone 7. Windows Phone 7 sales have been very flat. Before Christmas, numbers were down so it has got to be a great thing from Microsoft’s point of view. As a team together I’m sure they will be very strong.

Whether it is the right choice for Nokia – we will have to wait and see. I still think it would have been better to partner with Android. The Android train is already going so fast. You also have all the other big names taking on Android – Motorola, LG, Samsung and HTC using it already. Saying that it will now be a very interesting battle between these two systems. Its a very interesting twist.”

Complete Communications proprietor Adam Nyman:

“Dealers’ sales are mainly based on Android handsets so if it had gone in with that platform it would have been a lot better for us all. Despite that the Windows Phone 7 platform is impressive and not such a bad move for Nokia. For the high-end smartphones the Symbian platform simply wasn’t up to scratch. If the N8 had Microsoft or Android software on it, then it could have been one of the best phones out in the market, so this move will hopefully put Nokia back on the map.

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