The Panic And Wishful Thinking Behind Microsoft’s Nokia Buy

Peter Judge

Nokia and Microsoft have done the right thing, says Peter Judge. But making Microsoft more like Apple is a big risk

There’s no doubt in my mind that Microsoft’s intent to buy Nokia’s phone business is the right thing to do. But how much are we expecting from it?

Windows Phone has made solid gains, but is still well behind both Google’s Android and Apple’s iPhone. Owning the hardware and software does give Microsoft a chance to build a stronger share in the market, and it is now easily conceivable that it could eventually overtake the iPhone.  But its model is now closer to Apple’s than to Google’s – and it is Apple’s model which is losing in the market.

nokia microsoft Risto Siilasmaa Stgeve Ballmer September 2013Wishful thinking

There was clearly a lot of wishful thinking behind one analyst I heard on the radio who said Microsoft now had a solid opportunity amongst the business community to take the place of BlackBerry.  Somehow Radio 4 had fond an analyst who hadn’t heard of consumerisation, and who had no idea why blackBerry’s star has been eclipsed.

Windows Phone, from the moment it first appeared, has been the best phone to use with Microsoft Office and Outlook. The way it handles emails and appointments is very smooth – if I were an Outlook user, I would adopt it. Even before BlackBerry started to circle the plughole of doom, Windows Phone  should have been selling like hot cakes into business.

But being good with the monopoly office software isn’t enough for a phone. Users want to bring in their own devices, and don’t care too much for integration. Being good with business hasn’t done BlackBerry a lot of good, It’s overstating case, but there’s only room for one phone maker on the luxury enterprise cruise liner – and that ship is sinking, taking BlackBerry with it,.

Microsoft has better plans

Microsoft knows this, of course. Its strategy is all about the cloud and consumer phones. Windows Phone is doing well at the mid-range, and amongst people who are getting their first smartphone. As Mary Branscombe points out, over on ZDNet, the markets where Windows is most likely to squeeze past the iPhone are the developing, cost-conscious ones. Nokia makes the lion’s share of Windows Phones, and its Lumia is a lovely machine and a superb flagship, but the opportunity is lower down the scale.

Nokia’s Asha will come in handy there. Microsoft has no use for it in the long term, but it will be a very good gateway drug to get lower-end users onto Windows Phone, before it getst phased out in the next three or four years.

But there’s a problem here. A really good attack on those low-end markets needs an ecosystem of partners, of the kind that Jolla and Firefox are building, and which Google has.

Those partners are going to think twice before paying a licence fee to make a phone which then has to compete with the undoubted excellence of Nokia’s mid-range machine. Android is free.

To be sure, making Android phones is no picnic. Partners like HTC are already finding it hard to compete with Samsung, which more or less owns the Android market, thanks to its possession of chips, screens and processors, that give it far better margins than the rest. And there’s also the possibility that Google-owned Motorola can sweep into the market if it all gets too fragmented, and Google begins to agree with Nokia, that it’s best to do it all under one roof.T

For now, though, the Apple model is the one that is losing out to Android. Android made up 80 peccent of the smartphoens shipped in the second quarter of this year. The iPhone has dropped to 13 percent. Microsoft is on around three percent (maybe eight percent in the UK). So, yes, it can probably overtake Apple at some point.

But in emulating Apple, Microsoft may be tying itself into a strategy that is already failing.

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