What’s really driving the Nokia deal with Microsoft?

Stephen Elop, the CEO of Nokia, has been under a tremendous amount of pressure since he announced the partnership deal between Nokia and Microsoft last week.  Given the significant market share of the Symbian operating system, which is managed and maintained by Nokia, the confusion and anger is understandable as Elop has not made clear the strategic necessity of the deal other than the money that Microsoft is going to pay for the partnership.

Phone Operating System Market Share Q1'10

The anger inside Nokia is public and intense with protests from the employees garnering worldwide attention.

Nokia’s main operating system for it’s phones is the Symbian platform.  For quite awhile other phone manufacturers also used the Symbian OS for their phones.  Samsung and Sony Ericcson had good international offerings based on the Symbian OS.  Symbian was one of the first true ‘smartphone’ platforms.  It offered a software development kit (SDK) for developers and had a dedicated browser and supported the Opera browser.

Unfortunately, two things have happened to change the mobile phone world dramatically in a very short time.  First, the iPhone introduced the concept of easy to build, quick to deploy applications for the phone space with Google following very quickly with Android appealing to the same developer community.  Both Apple and Google have been fighting each other to attract the apps to their platforms and have been very succcessful.

There are really five potential global operating systems available for the new generation of smartphones for both device manufacturers and application developers.  Those operating systems are iOS for iPhone (Apple devices exclusively), Palm WebOS (now part of HP), Android, Symbian, and now, Windows Phone 7.

The other two major Symbian licensees have shifted to other platforms with Sony Ericsson moving to Android and continuing to invest in that platform, and Samsung supporting both Windows Phone 7 and Android.  This leaves Symbian in third place and likely the WebOS a distant fourth place in terms of attracting developer interest and support.

With Nokia carrying the flag for Symbian on it’s own the likelihood of success long-term looks to be challenging.   Elop made a clear decision that, while a huge risk, marries one of the worlds largest handset vendors with one of the industry leader’s emerging smartphone platform.  This gives Nokia considerable clout with Microsoft in the development and evolution of the phone platform and gives Microsoft a leg up in building market share over Apple and Android quickly.  This should also allow Nokia to use it’s formidable software resources to extend and develop solutions based on the Windows Phone 7.

In a nutshell what this is about is a significant change in the Phone Operating System wars.  It’s no longer about user interface and browser speeds.  It’s about the applications available to the users.  The platform that has the most applications that are relevant to users and the more device choices are where the market is starting to turn.  Given that, it’s clear why Nokia’s executive team is making this bet.  And it makes you think about the risk to Apple and HP WebOS longer term.

2 thoughts on “What’s really driving the Nokia deal with Microsoft?

  1. Ken Goetsch

    Hey Dave, love the fact that you are blogging about your thoughts again. In terms of the mobile phone wars, how do you handicap RIM’s chances?

    Unless Jobs leaves Apple, I think Apple will continue to drive new opportunities in the mobile space. I don’t particularly like their new subscription plan offering in the tablet space for publishers, but presume that logic will prevail at some point.

    Google’s Android has surprised everyone with the speed of adoption in the mobile space and it’s clear that Android tablets are the real competitor to the Ipad, as Windows doesn’t look capable for decent touch until Win8. By then, many OEMs will have cut their teeth on Android tablets at zero royalty – very bad for MS.

    With respect to Nokia and Microsoft, it’s a smart tie-up for both firms, but based on the track record of MS in this space, is fraught with danger.

    Regards,
    Ken

  2. dwriter

    Ken, good points. I have a hard time seeing how RIM stays relevant in this space but the reality is that they have a lot of loyal customers still and they’ve been counted out before and survived. I haven’t seen anything yet from them that indicates a breakout strategy (the pad that they are doing doesn’t seem to be it) but that doesn’t mean there isn’t one.

    I also agree with your concern about MS’ track record in the space but the odds just went way up by the tie-up with one of the top device suppliers in the world.

    Thanks for the nice comment on my blogging again.

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