Don't say you were surprised that Microsoft acquired Nokia's mobile handset business. Microsoft isn't hard to figure out these days and given its relentless pursuit of copying Apple, Nokia was a simple and conclusive choice to buy some time for Windows Phone and calm down increasingly concerned investors. However, two losers in a market that has been drained of the easy money won't necessarily result in one winner. That could be different in a market that is still waiting to be exploited: The enterprise smart phone platform.
In some way, Stephen Elop's mission has been given more time. The buyout of Nokia's mobile division is at least a measure to control a burning platform and give Nokia's mobile phones a chance against the iOS and Android sharks swimming below.
What is Microsoft Trying to Fix?
Microsoft's entry into the smartphone arena was too late and misguided, with a customer message that was targeted at an environment that did not exist. You may remember the initial Windows Phone commercials that mocked consumers for spending too much time on their phones. Strangely enough, consumers enjoyed, and still enjoy, spending time on their phones and they don't like being made fun of for that.
1. Windows Phone Positioning
From the start, the market setup for Windows Phone was a trainwreck whose future was built on the hope that consumers would take a look at Windows Phones and be convinced that they are much better than, for example, an iPhone. Unfortunately that did not happen and Windows Phone smartphones are only, about three years after launch, hovering around a 3 percent market share, according to IDC. The perception of Windows Phone as an inferior platform over Android and iOS is now solidified in consumers' minds. There is no easy fix -- Windows Phone needs a complete re-launch with a convincing message that differentiates it from competitors and aligns it with market requirements and a cohesive hardware platform to deliver a very specific experience. Nokia could be the vehicle to deliver the hardware platform.
2. Market Share to Support Windows
The smartphone market isn't your occasional growth market for Microsoft. A successful smartphone platform is essential for Microsoft's long term survival. The operating system platform of today consists of a symbiotic technical foundation spanning from the enterprise in physical, virtualization and cloud environments to the desktop, to tablets and phones. Not too long ago, Microsoft held more than 90 percent of OS market share thanks to its dominance on desktop , but Android and iOS are shifting and total platform shipments forced Microsoft's Windows shares down to just 24 percent. Microsoft ability to drive new technologies into the enterprise and consumer market, solely via the market penetration of Windows, has evaporated. As a growth market with rapid device replacement rates, the smartphone and tablet platform are essential for Microsoft to help Windows and the core business of the company survive in the long term.
As it stands today, Microsoft is losing the platform race and it now needs solutions that will have a measurable effect. Nokia's market share in the smartphone arena has dwindled, as well, to below 3 percent, according to IDC, which will not allow Microsoft to shake up the smartphone market in the short term.
3. Deliver User Experience
Conceivably, the most important component of Nokia is Microsoft's perceived ability to now control hardware, in addition to simply delivering the software, and then depend on the ideas of its partners to build hardware around it. While Nokia is mainly understood today as a maker of cheap feature phones, there is a large engineering team and we have seen some interesting technology visions and sparks of innovations over the past few years. A reset combined with a new direction to take a more playful and visionary approach to the phone of the future that tightly integrates with Microsoft's operating systems and platforms such as Xbox, is the most critical component of this acquisition. Microsoft's problem is that it has alienated some of its partners with the Surface tablet and has shown that it does not care about its relationships that much, which could impact it in the Windows Phone space as well. If Microsoft wants to be like Apple, it could very well find itself in a scenario in which Nokia is the only maker of Windows Phones.
Wolfgang Gruener is a contributor to Tom's IT Pro. He is currently principal analyst at Ndicio Research, a market analysis firm that focuses on cloud computing and disruptive technologies. An 18-year veteran in IT journalism and market research, he previously published TG Daily and was editor of Tom's Hardware news, which he grew from a link collection in the early 2000s into one of the most comprehensive and trusted technology news sources.
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