Do or die for Nokia and Microsoft?

Well they are finally rolling out the Nokia Lumina 900 series running the Windows Phone OS. They are doing this with AT&T and offering cut-rate prices.  You will be able to pick these phones up for $100.  I think the price point reflects that fact that Nokia is desperate in the US market and Microsoft is desperate to catch up with Apple and Google. I It was Google VP (and former Microsoft GM) Vic Gudotra who tweeted when this unlikely partnership was announced, “Two turkey’s do not make an eagle”. For the record I support t turkeys, if you have seen them in the wild they are a damn cool bird.  But the quote did summarize the state of Nokia and Microsoft in the mobile space at the current time

I was actually meeting with an old co-worker at AT&T who let me handle the Windows Phone. It was the HTC Titan.  The screen was bigger than my iPhone3 (I am always running behind the latest and greatest). When the iPhone5 comes out I may upgrade.  In any case back to the HTC Titan.  The much discussed Metro interface was nice, is it a game changer? No, but nice and I guess it comes down to personal preference.  Some will like the iPhones, others Android and yet others will like the Metro interface.  There does seem to be high hopes around Windows 8.  I remain skeptical, but Microsoft has the clout to make the new operating system a success.  Not just on the desktop but the smart phone and the tablet.  Back to my friend, he let me hold the device. Which was the first time some one had let me do that.   Note to Microsoft phone people stop withe the demo’s and geeky talk, let people experience the phone.

Can either of these two companies create an Apple size comeback?  Nokia is more Apple like in that it is spiraling towards rock bottom.  Microsoft still has Windows and Office generating over $20 billion so though not a company with a lot of “panache”, they are not dying yet.  My fear for Nokia has always been the move away from software and going head to head with Samsung, LG, HTC and the Chinese handset manufacturers.  It will be hard to distinguish themselves as different from the others.  Of course they did do just that when they selected Microsoft as their phone OS vendor.  Nokia had also blown the US market years ago when they refused to make a flip phone.  For a decade Nokia was a much bigger provider outside the US than inside.  For a time it seemed to be ok, “hey we don’t need the US market”.  Odd, but it is what they did.  Then like so many things in mobility, the iPhone hit and changed the landscape.

Moving forward it is apparent that Nokia will need a tablet play as the idea of just providing smart phones is simply not enough.  Due to their relationship with Microsoft, Nokia is in a holding pattern until Windows 8 arrives in the fall.  If I have a concern here for Nokia/Microsoft it is that no one is holding off on their purchase of the new iPad 3 in hopes of a better Windows 8 tablet.  The iPad has garnered so much mind share that I think many people do not realize Microsoft and its OEM partners are coming out with a tablet.  It does not hurt that Apple stock is now trading over $600 a share and they just announced a quarterly dividend of $2.64 a share.

What about Microsoft in this space?  Well as discussed they will not go broke anytime soon, but this is a last stand in the phone space.  Never has Microsoft attached its sails to one strategic partner like it has with Nokia.  For Microsoft it is important that Nokia maintain and start to regrow its international footprint.  An area where Windows Phone has traditionally been weak.  It i also a major reason for partnering with Nokia.  Nokia invested early and heavily in India and China so it makes sense, this unique partnership. It also needs success in the US market, it only to offset the market presence of both Apple and Google.  Apple really rocked the industry with the iPhone, but no company was caught as off guard as Microsoft.  I was there at the time and there was a flippant view towards Apple in this space, thinking they were naive and would fail.  Revolutions happen and if you don’t anticipate them you will be over thrown.

In conclusion, the next 12-18 months will determine if this partnership will succeed or fail.  There will be challenges.  Microsoft has other mobile handset partners.  What if one of them makes the ultimate Windows Phone experience?  How quickly would Microsoft dump Nokia and how quickly would Nokia run to Google’s arms?  If share doe snot grow but remains stagnant when does one throw in the towel?  AT&T is the largest carrier and promoter of Windows Phone in the US, but how long will their commitment be if the Windows phone continues to falter?  Will Nokia and Microsoft be able to build up a strong developer community to build applications?  There are a lot of unanswered questions and only time will tell.  Some say this partnership needs to succeed, to create an alternative eco system to what Google and Apple provide.  I have always found this a perplexing and humorous notion.  Why do we need a third system?  That is something only the technical people say.  The “people” I cannot see really care one way or the other.  If they did care the Microsoft Zune would still be around.

Good Night and Good Luck

Hans Henrik Hoffmann March 27, 2012

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