Nokia's recent announcement of chucking out their Symbian platform and bringing home the Windows Phone 7 is an interesting move by both Nokia and Microsoft. This is marriage of two partners who were once the greats and now are fighting younger, nimbler opponents on their own turf. Apple with its iPhone and later Google's Android platform has made life very difficult for Nokia. Similarly, Microsoft is battling its monopoly on operating systems and office suites on multiple fronts like the Google Chrome OS platform, Google Docs, Facebook, Open Doc movement.
What is interesting for me is Nokia's perspective here. They were still the market leaders overall in mobiles. By moving away from their own platform, they have own relegated themselves from a A league to the B league. There is no difference now between a Chinese or Taiwanese mobile assembler and Nokia. They have moved from a high margin business to a commodity oriented low margin business. What prompted them to do this is what would be interesting to understand.
Microsoft, on the other hand, has been a gainer in the transaction. They suddenly get a reputed brand endorsing their platform and enhance their market share manifold. Mobiles, tablets, handhelds are the likely consumer devices of the future. Microsoft, from being an outsider in that segment, all of a sudden would be catapulted to one of the top-three positions. So, its all great news for them. It just needs to be seen how they capitalize on the opportunity.
What happens to Nokia is anyone's guess. The next 2-3 year would make or mar the company's prospects. They remind of so much of great technology companies of the past – Kodak, Xerox, Palm, Motorola, Texas Instruments and a lot others – who were all big names during their hay day but now are also-rans in an ever-changing and unforgiving industry.
4 comments:
Symbian wasn't cutting it in the smartphones market. Nokia is clutching at MS hoping it can claw its way back in the higher end smartphone segment that Apple has eaten into. http://www.economist.com/blogs/dailychart/2011/02/daily_chart_mobile-phone_market
My thoughts might be long-
1. Symb was not competitive enough for the smartphone markets especially in the US. Now if a global product has <1% penetration in US, a global co like Nokia has a lot to worry. IPhone and Android was beating the shit out of Nokia's bottomline in the smarphone segment for last 3-4 yrs now. So Nokia had to act!
2. Stephen Elop, Nokia's current President and CEO, was MS Office head before joining Nokia. Can this be a conspiracy theory of a rogue agent at Nokia from MS?
3. Nokia's Symb was anyway downshifted to middle layer of smartphone segment offering, Nokia's first (internal) choice of smartphone was on MeeGo (linux based phone) whose first product N900 was quite exceptional in the market. Too bad, Nokia's execution machinery is too lazy/slow and the next phone on the same platform never saw light, even after 2.5yrs of R&D efforts! So, how long can Nokia wait to send out a strong phone in this segment?
4. Elop got a free hand from executive board + shareholders to turn around the fortunes of co within 1 yr or perish! So, he chose MS, as it's wide reach in US will help Nokia become competitive again in US. But then, why not Android (from Google which is also US-based)? Elop has enormous amount of shares in MS, so can this be the catalyst?
5. In our debate as to what happens to the company, we often forget what happens to the ppl inside. Symb is now shown the door (meaning- no new investments or R&D efforts, only maintenance) as all SW for Nokia's next smartphone comes from MS. HW to be provided by Nokia, Nokia still owns the HW space without question which means the factories are intact. So 7K ppl in Symb making SW are all suddenly redundant! Simply put, only maintenance ppl are needed, which is <10%. Which means 6k excess ppl who needs to go? 700 of those in Bangalore! How many telecom cos are hiring in India?
Now God only knows if this decision is going to make Nokia profitable or not, but let me tell you a short story about MS, which I experienced while I was at Intel:
1. During Win 98 and Win 2000 days, MS didn't have any wifi connection manager to connect laptops to the WLANs. Intel used to make those wifi chips along with the SW (it used to be called Intel ProSet Application, that's where I was working). During XP days, MS said both Intel & MS connection manager would co-exist as by that time, they had a rudimentary Connection Mgr. Nowadays, with Win 7, MS has said they would only support MS Connection Manager!
I seriously feel that this is the same way MS-Nokia alliance would head to. Once MS establishes a stable and competitive SW on Windows mobile 7, it would go the Intel way!
In short, after 5 wonderful yrs in Nokia, now begins another search for a job!
I agree with both of you. Nokia was falling behind in the smartphone markets. But was MS the right choice? I seriously doubt it. Nokia should have tried to beef up its own R&D to really compete in the marketplace. In my opinion, if you take borrowed technology and compete, you get into the trap of becoming a marginalized commodity player. Look at Apple, they are who they are simply because they are not compromising on their platform. Today, Samsung, HTC, Motorola make nearly as good touch phones as Apple from a hardware perspective, but none of them are able to compete on the hardware+software combo, where Apple is the king.
Plus, MS has a few good reviews for its platform and hardly anything else. Nokia & MS now have to ensure that they combo works. If it doesn't...well..that's another story then.
I think this technology tie-up was in the offing for a long time and that is one of the reasons why Elop was bought on board. I doubt if it was something that was sprung to the Nokia board all of a sudden.
@Nandi - You have bought up a very very important point - that of the employees. It is perhaps the most overlooked aspect of any merger. But, perhaps the most critical. Best wishes to all Symbian folks at Nokia from a long time Symbian fan.
@Nana - Great link.Good Info. Thanks
Abhi, They already tried their own R&D and failed. Nokia already spends more than double on R&D compared to Apple and they were still not coming up with a competitive platform. http://bit.ly/gwWKIk
Faced with diminishing profit margins, they're cutting R&D and hoping to piggyback on MS's software. This is a great test/opportunity for MS as well. If they can come up with the goods, they will have a truly giant market - but if it's the same old behind-the-innovation-curve Windows, then that might be bad news for both.
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