Microsoft, Nokia and the Snowgun

Category: Mobile

The first Monday in September saw a whole lot of desperation: Microsoft announced plans to buy Nokia’s entire mobile business for $7 billion. Will this transform Microsoft into a mobile device powerhouse? Or is it more like trying to come from behind to win the Kentucky Derby on a horse with a broken leg by flogging the beast with money? Here's my analysis...

Microsoft + Nokia = ???

As a kid, my favorite line from the cartoons came from Simon Bar Sinister in the Underdog series. "With the formula for the Snow Gun, soon I will rule the world! Bwahahaha!!" It seems that Microsoft CEO Steve Ballmer comes from the same mold. But will this tech merger provide Microsoft with a fearful weapon capable of challenging Apple and Google for mobile device dominance?

Wall Street responded to the news by knocking five percent off the price of Microsoft stock the morning after the Nokia deal was announced. Coincidentally, that was about the same amount MSFT gained right after Steve Ballmer announced he is stepping down from the CEO position. The tech media is awkwardly trying to put lipstick on this pig.

Microsoft, Nokia and the Snowgun

Every tech news outlet is talking about the Nokia deal as Microsoft’s best chance to “pull out of the third place slot” in the mobile operating system market. The rah-rah articles politely ignore the fact that Microsoft is in a very distant third place, with just 3.7 percent of the market. Admittedly, that’s up from 1.5 percent when the Nokia Lumia launched, but it is rather disingenuous to trumpet the company’s “doubling” of its market share.

Windows Phone is simply not a serious contender in the mobile space. Microsoft’s partnership with Nokia only dragged Nokia down. Once the world’s leading handset manufacturer, Nokia’s sales have been plummeting even faster than its CEO, Stephen Elop, has been able to gut the company. He plans to finish what he started in 2010, chopping more than 50 percent off Nokia’s operating expenses before the merger with Microsoft, and that cannot be good for employee morale.

(Why yes, you do need enthusiastic, loyal, confident employees in order to compete in business.)

Is the World Ready for Mokia?

Ballmer has been aching to take control of Nokia for a long time. He feels that there’s too much wasted, duplicative marketing effort with separate companies. Other than that, there doesn’t seem to be any good reason for Microsoft to buy Nokia. The former already had the latter in a death grip.

Nokia, incredibly, agreed to make Windows Phone its exclusive mobile operating system. Samsung, HTC, and other device makers wisely hitched their wagons to the wildly popular Android and other OSes that people actually want to buy. Nokia accounts for more than 85 percent of Windows Phone sales… the embarrassingly tiny amount of Windows Phone sales.

Perhaps Microsoft has grand visions of becoming more like Apple, which is successful at both hardware and software. Or perhaps, in the wake of Google's acquisition of Motorola, they had a "me too" moment.

But when a software giant that cannot make a marketable mobile OS takes over a company that used to make marketable phones, nothing good will ensue. Microsoft's past forays into consumer electronics don't inspire me to believe that the Nokia partnership will bear fruit. Remember the Kin and the Zune? What about the Spot Watch? And how long will the Surface last, given that the company recently posted a $900 million quarterly loss on that product.

I'm not rooting for Mokia to fail. Competition in the marketplace generally leads to innovation, lower prices, and more choice for consumers. But my gut tells me that Nokia’s 32,000 employees will keep their jobs a little longer, and the new management will run the company into the ground shortly.

Your thoughts on this topic are welcome! Post your comment or question below...

 
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Most recent comments on "Microsoft, Nokia and the Snowgun"

Posted by:

Anthony
05 Sep 2013

Interesting take Bob. I've read some positive things about winphone recently. I have a few friends using them and they seem very happy. One is even a former iphone user.
I've been considering trying one myself. I've lived in both the IOS and Android ecosystems for a while. After reading your views I will need to investigate further.
Thanks as always for your posts and newsletter!
Tony


Posted by:

Larry
05 Sep 2013

I have a Nokia Lumia 521 Windows 8 phone, it is near perfect AND it only cost me $150 to own outright! I am very happy with this T-Mobile phone. I hope MS continues with what Nokia started in providing quality phones at reasonable prices.
Larry


Posted by:

John
05 Sep 2013

Hi while I am aware that you are looking from an American perspective where nokia were never that big. I have to say that I have had lots of mobiles over the years. The first few were Ericsson which lasted for years and never gave any trouble they were only replaced when the battery life dropped to a few days. They joined up with Sony and I had about 4 of their phones which went from bad to worse. The last Sony was repaired 3 times and replaced twice in one year. I then joined most folk in Europe and got a nokia, an e 71 once you got used to its operating system it was a fantastic phone 9 or 10 days battery life and often bounced off concrete from 6 or 10 foot height. Had GPS and proper maps on the phone none of this download maps as you drive and If you lose signal your lost too shit that Apple and android do. Current phone is an nokia n700 much better GPS even smaller but still has 2 or 3 days battery life and also has been dropped on concrete a few times with out problems. While as a phone very good call quality not like iphone which chops the end off most words. The other thing about iphone I see most folk charging them 2 or3 times a day while both iphone and Samsung phones all seem to have cracked screens. Now my better half has a nokia lumia 800 and I am very impressed with both the camera and how smooth win phone 7.5 works and battery on that lasts about 3 days so probably my next phone will be lumia 925 or whatever is out then current phone is only 2 years old so it might be another 2 years but it will be a nokia. To sum up nokia make phones not style icons and while I have about 50 apps on my phone I only use maps notes camera and e reader so the fact that iphone has half a billion apps don't interest me, I will gladly swop it for a battery life of few days


Posted by:

Louis St. Germain
05 Sep 2013

In the era of Win 95 I bought a windows phone. I liked it. When Win 98 came along Microsoft stop supporting the old phone. I thought it was a mistake but then I would. Maybe Microsoft is filled with the next newest thing people. Their OS's are only supported for a limited time before they fix what's not broken so why not their hardware? I am an old white man and alas Microsoft is run by old white men or if not chronologically old, intellectually old. As Nokia goes I like Nokia I have exclusively used their products for years until Android. Microsoft not so much. The reason I think this is in my estimation Microsoft is living in the past. They are allowing a conservative bunch to ruin a formerly progressive company. They need to lead not leave the starting gate ten minutes late.


Posted by:

Joe
05 Sep 2013

Bob, this is BY FAR, THE BEST ANA;YSIS OF THIS TOPIC I HAVE SEEN! Keep up the good work.


Posted by:

LJD
05 Sep 2013

Well, admittedly I am very late to the smart phone party, but I just bought the Nokia Lumia 520 last weekend - two days before the announcement that Microsoft had bought Nokia. This is my first smartphone and I LOVE it!! I am already running Windows on my PC, so having the same OS on my phone made a lot of sense to me, and made everything a whole lot easier to learn. The Lumia 520 was on sale over the Labour Day weekend as pre-paid phone for only $99, so I have no outrageously expensive monthly contract either! You cannot beat that price for a no-contract smart phone up here in Canada. The GPS functionality on it is better than my dedicated Garmin GPS, gmail was incredibly easy to set up and all my contacts migrated over perfectly. Honestly, this phone has everything I could want in a smart phone, and I couldn't be more thrilled with it. So I am hoping that the Microsoft/Nokia merger will work out well for Nokia because, based on my experience so far with the Lumia I would definitely buy another when the time comes.


Posted by:

RandiO
05 Sep 2013

I dunno! I found your assessment quite harsh or at least negative.
I have been in the Microsoft camp since Win3.1 and I despise the business model of Apple that (at the very least) is very monopolistic and truly inflexible for advanced users (who don't know Unix).
Wasn't it Apple that whined and sued MSFT for interleaving InternetExplorer as a part of their Operating System? Yet the common iPhone user needs to be breast-fed from iTunes and must practically own multiple other expensive Apple product$ for a simple turnkey operation.
The other competition for users’ dollars is Google/Android and Google paid dearly to buy Motorola for IP fights against Apple.
Don't get me wrong, I think Google/Moto-X appears to be a capable OpenSouce smartphone and wish them success in the marketplace.
I may be the odd man out but I feel Windows8 is a very stable Operating System and has built-in flexibility for multiple types of computing environments (smartphones/tablets/desktops). I wish them the best of luck in their attempts and hope they put up a stiff fight in a 3-way competitive marketplace that the consumers will gain great benefit from. I would not hesitate to own a WinSurfacePro and/or a Windows Phone, if need need arises.


Posted by:

Hannibal V-
06 Sep 2013

Excellent analysis, Bob.
Only... when I got to your opening words in that sentence "But when a software giant that cannot make a marketable mobile OS..." I jumped because I missed the "mobile" at first sight, and was assuming you were talking about Windows 8, which I truly believe to be a loser. An OS which purports to represent the 32-year-old software tradition of the venerable Personal Computer, but which indeed despises the PC. It seems like it's time to call Bill Gates to come back at the helm!


Posted by:

TheRube
06 Sep 2013

Mr. Rankin . . . my Sentiments, EXACTLY!!!

TheRube


Posted by:

Tom Boyd
06 Sep 2013

I have to agree on the point that this deal may not help Microsoft, but dogging the Windows phone and Surface is totally unfair. I've been using the Windows phone since they came out and I'll agree the HTC phone didn't do it justice, but I know have the Samsung SGH-i667 and it will out perform any iPhone or Android on the market. It's faster, takes much better pictures and has Office which as a Systems Repair tech comes in very handy. The Surface out performs the iPad by a mile especially having the added USB and SD Reader. I think if Microsoft would hire better Ad designers they could jump up quickly, but as it stands now their Ad Men Suck.


Posted by:

Joe S.
07 Sep 2013

I, for one, hope this merger is successful. I moved from the I-Phone which to me has become boring to the Nokia 920 and love the OS and the phone. Only drawback I see is waiting for addl apps, but that's not critical to me. I also don't find Android that cool -- tired of the same boring Icons that just "sit" there. Give me Windows 8 any day --- I know, I'm a voice in the desert, but I'm having fun in this brave new world of Windows 8.


Posted by:

Keith Swain
15 Sep 2013

Not sure if this analysis is just to make people react or you mean every word... However it seems that a lot of the underlying reasons for this acquisition are being missed.

I am not the best proponent of Microsoft but anyone who thinks they (MS) have "grand visions of becoming more like Apple" are missing the whole competitive ilk here.

Anyone remember the death knells of Apple? (Twice!)

MS are already in key number one slots in many places and I don't think just becoming "a mobile phone producer" is very high up on their Business Criteria list. They DO want to become more "mobile" yes and they have already sunk a lot of money into Nokia yes, but does anyone think $7 billion is much to MS? (Remember Hotmail? MS paid $600 million for that when they could have developed the program for much less than 1/2 million at the time. That was all about emails addresses, know how, contacts, planning etc.)

This is all about the long haul and bringing "pieces" into a much bigger Business Plan. Yes, MS's core is operating systems but all companies need to expand and grow their BUSINESS lines not just their revenue.

Nokia were already trashing their OWN future (old handsets, little innovation, etc.) MS didn't cause that, Nokia did themselves (I still have a Nokia Communicator (in my drawer of course!) and it WAS THE BEST BUSINESS mobile phone/all-in-one's on the market with fax, extensive phone book/contacts, business features (forwarding messages was a dream!) but it never moved on!!).

It will be a challenge to bring in so many employees, yes and to decide where to fit this into their organisation but are you guys REALLY going to bet AGAINST Microsoft??

Watch this space I guess...


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