What Does Nokia Really Mean To Microsoft?

Today, it was announced that Microsoft will buy the services and mobile device business from Nokia. Microsoft doesn’t get to use the Nokia name, since it appears that they aren’t getting the switching, infrastructure and other businesses that Nokia has. None of this is really a surprise. But there may be a “hidden prize”, and one not one that is necessary good.

What Microsoft Gets

What Microsoft appears to be buying are the R&D staff, marketing, support, patents and supply chain, meaning they are buying a ready-to-run mobile device manufacturer. What they aren’t getting is the Nokia name, and the other business groups in Nokia, including their switching and networking group.

Most of the business implications of this deal are obvious. This strengthens Microsoft’s skills in mobile hardware and software. It expands their supply chain for making devices. It gets them access to a patent portfolio, which is ammunition in the on-going Patent Wars. What I want to talk about are 2 main elements. Basically, I want to put some perspective on this deal, because it appears it is being blown way out of proportion. And I want to talk about the prospect of Stephen Elop as the new Microsoft CEO.

Is This A Gamechanger?

With the way the markets are reacting, you would think this deal is going to completely change the mobile computing landscape. It is time for a reality check: this does nothing to change the mobile computing world. Overall, I think this is a smart move by Microsoft, and I’m only surprised that it took this long for the deal to happen. But this move presents zero threat to iOS or Android in the short-term or medium-term. The long-term threat depends entirely on the new CEO and where they take the company.

Adding Nokia’s mobile device business is a small but useful piece in the Microsoft rebuild. It gives them depth and experience in mobile devices that Microsoft doesn’t have. Granted, Microsoft now has some experience with the Surface, but Nokia’s experience is both deeper and wider here. This should help Microsoft to some degree.

What this won’t do is improve the fortunes of Windows Phone on smartphones, or Windows 8 on tablets. Why? Because other than the names and logos on the devices, nothing else has changed. This doesn’t introduce ground-breaking new technology into the market. It doesn’t give Microsoft fresh perspective from a vibrant and innovative company. If anything, all it does is bring more people who work for a once-dominant player who have had little success in holding back more capable competitors. But it does bring people who know a lot about building good, reliable devices, and inexpensive ones when necessary. That is good for Microsoft is they are determined to continue to make their own gear and compete with their OEM’s.

What About Stephen Elop?

Stephen Elop’s track record with Nokia should instantly disqualify him as a new CEO for Microsoft. Basically, Elop’s story is Ballmer’s story, just one chapter ahead. Consider the tale: here is the CEO of the largest and most dominant player in the mobile phone market, and the global smartphone market. Their only weak spot in smartphones was North America, which was a landscape dominated by Blackberry, Palm and Windows Mobile. This is a company that made nearly 1 out of 5 mobile phones of all kinds, and owned 65% of the global smartphone market. From 2007 to now, that company has gone from being a case study in business success to being one of the poster children of business failure. All of that happened under Elop’s watch.

Nokia was a company that was complacent. Elop and his team dismissed the iPhone and Android. They tried to ignore it. When they finally woke up and opened their eyes, their next steps were questionable. First, they tried a half-hearted attempt to rebuild by working on Maemo. Then, rather than picking the dominant mobile operating system, one with a rich and vibrant ecosystem, they selected a new platform with limited marketshare and a thinly populated ecosystem. Why? First, because Microsoft gave them money and help, something they wouldn’t get if they went with Android. Second, because they didn’t want to be “just another Android manufacturer”, since Microsoft was going to give them pride of place in the Windows Phone world.

Nokia’s story is a foreshadowing of Microsoft’s future. Elop’s trajectory is Ballmer’s trajectory. They only reason Nokia didn’t fire Elop outright is that he still had skill in managing the mobile device group. What he didn’t have was vision or the courage necessary to make the hard choices. Oddly enough, the Microsoft path was familiar. It gave them, to some degree, what they had with Symbian: some control and say in the direction of the platform. Choosing Android would take courage, because they would have to compete head-to-head with other Android manufacturers with the same platform. Windows Phone allowed them to abdicate brand building and platform awareness to Microsoft. With Android, they were still on their own.

Stephen Elop has shown us exactly what he can do with a company in a dominant position but a rapidly shifting landscape. This is what Microsoft faces today. Elop failed once, and quite spectacularly. There is little to indicate that putting him in charge of Microsoft would have a different outcome. Microsoft needs someone who has a cohesive and grand vision, who has the strength of will to make the vision real, and is willing to take some long odds in the process. Stephen Elop has demonstrated none of that ability.

Next Steps

While it will take some time to truly integrate the Nokia teams into Microsoft, the next step might be for Microsoft to look at Blackberry. Here is another company whose trajectory foreshadows Microsoft’s future: a dominant company who took their lead for granted, and has fallen to near irrelevance. Microsoft isn’t there yet, but like Nokia, the paths look eerily similar. But Blackberry has things that Microsoft could use for their rebuild. They have a strong skillset in enterprise integration and mobile security, something the other platforms just don’t have in the same magnitude. Blackberry has a strong network services story. Adding Blackberry’s network services and infrastructure to the Azure portfolio strengthens an already strong product. Combining BBM and Skype would give them a scalable and secure communications platform.

Whatever Microsoft does with Nokia, what they can’t do is assume that it will save them entirely. It should help. It gives them a better story on mobile devices. But it doesn’t help Windows Phone, and doesn’t present a threat to the likes of Apple, Samsung, HTC or Google. It is a piece of the puzzle, not the entire solution.

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