Microsoft’s Nokia purchase unlikely to change smart phone market

It had been rumoured for a long time that one of Steve Ballmer’s last moves as CEO of Microsoft Corp. would be to get into the mobile phone business on the hardware side.

Certainly his Windows Phone market share demanded it. Stuck in fourth place, based on server statistics drawn from a wide variety of Web sites as to the operating system accessing it, all the technical wizardry and user experience flash that was built into the product simply wasn’t taking serious market share.

By owning hardware as well as software, Microsoft can match Apple (iPhone/iOS), Google (with the Moto X and Nexus Android products), and BlackBerry (Z10/BB10) with a competitive platform where hardware and software are co-developed to work well together.

But, unfortunately for Microsoft, this is unlikely to be enough.

Frankly, Microsoft would have done better buying BlackBerry, although that move would have required Ballmer to swallow hard and accept the Blackberry QNX-derived BB10 system as the company’s “go forward” mobile product rather than the Windows one.

BB10’s superior security features will help BlackBerry maintain a toehold in the market that cannot be shaken, even if the company is never again a market leader in the consumer or professional single-user space. For military, intelligence, government, journalism or trading floor type purposes, all high security, highly responsive environments with high data flows, BlackBerry’s power management and “always encrypted” potentials (plus the Q-series with real keyboards for power thumb typists) give it space to survive no matter what happens.

In the United States, Nokia lost almost all of its market share. That means Microsoft will have to, post-acquisition, start the carrier dance to get their handsets into the market.

While Microsoft is experienced with what’s required — give the carriers bundles of cash for marketing, allow them to control the user experience entirely (goodness knows Microsoft never defended the integrity of the PC user experience against hardware manufacturers’ changes), restrict the update cycle to avoid load on the “evaluation centre” — it won’t be good enough to take market share away from the existing leaders.

Carriers, after all, get all that from Android manufacturers like Samsung, Google (Motorola), and HTC. Apple has been the only one capable of negotiating a “hands off our product” stance with carriers and make it stick year after year.

More worrisome for Microsoft’s shareholders (and whoever becomes its CEO and thus inherits this decision) is the pending fragmentation of the Android market.

Every Android vendor seeks to solve Android’s core problems in a way favourable to itself. Every Android vendor also worries that, at some point, Google will “get more evil” and start to restrict features, seriously charge for access, or some other business-limiting move. (After all, Google now competes in the hardware space.)

So there are development projects all over the map to create forks in the Android road. This, in turn, allows rumoured market entrants like Amazon or Facebook to consider pathways into the market just as much as Samsung (for instance) might insulate itself from Google and differentiate itself from the other Android players.

If this sounds like how Windows lost share in the server room, to variations on the Linux theme, you’re right.

But all these Android derivations (and BB10, with its latest update) are capable of running anything from the Google Play market designed for the latest reference point (Jelly Bean). That creates instant app markets for any new entrant with an Android-derived starting point, whereas Microsoft has to cajole developers to create Windows Mobile products.

The dream of “Windows everywhere” that has animated Microsoft since the 1990s has now become a millstone around the company’s neck. Acquiring Nokia’s assets is now simply a way to preserve Windows Phone’s share (since now there’s no danger of Nokia shifting to another system to try and preserve its hardware markets).

Here’s the reason 1+1 won’t even be 2, much less 3, and it shows how big the challenge is for Microsoft [Nasdaq: MSFT] to make this work for them — from Karl Denninger’s Market Ticker Forum, where he published his server stats after this deal was announced:

Android: 46.06 per cent.  iPhone: 44.79 per cent. Blackberry: 7.36 per cent (3.96 legacy, 3.40 BB10). Windows: 1.61 per cent (current plus legacy). Nokia/Symbian: 0.15 per cent.

Have fun converting those residual Symbian users, because the rest are likely out of reach.

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Jim Love, Chief Content Officer, IT World Canada
Bruce Stewart
Bruce Stewart
Bruce Stewart is a 40 year veteran of IT management and above. He is an executive advisor serving CIOs and senior executives in areas of governance, strategy, complex architectural transitions, portfolio yield and value generation. - See more at:

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