If you think MSFT is bad news for Nokia, think again

I’m already seeing tweet after tweet of people seriously criticising the Nokia-Microsoft news this morning. Phrases like ‘jumping off a burning platform into a sinking ship’, or, ‘Nokia is dead’, for example.

Nokia was dead as far as the market was concerned. The market demanded immediate moves to address this — and, frankly speaking, the only option for Nokia was to jump aboard one of the ecosystems. Let’s be clear: The *only* option. The company had left it too late to do anything else. There was *no* time left to develop or build. This is a critical point. The sabres were slowly being banged on the table.

Google was an option for Nokia. A serious option. However rumour has it (well, a good source) that the two companies could not agree on terms. This is not to close the door on a Google-Nokia option in future. Right now though, the company needed a response for the market that included the phrase ‘deal with Microsoft/Google/webOs’ (delete as appropriate — and yes, webOS would have been an unusual option).

So Nokia was already dead. Ergo talk of surrendering their end-to-end independence and so on: Irrelevant. There was no way the market would let Nokia get through today without the statements they’ve already made. Deal with it.

The next big issue is: Can it be done? It sounds pretty compelling on paper. How will Elop get on with the thousands of die hard Symbian/MeeGo employees resistant to any change whatsoever? Well, memo should have reset a lot of brains this week. But I think the question of execution is a really big one.

As for Microsoft? Well, they’ve snared the big fish — a deal of a lifetime — with the world’s largest operator. I think they will be pretty happy. They now have a response for all those doubting their strategy.

It remains to be seen just how HTC, LG and the other WP7 manufacturers will react. Samsung, already hot on Nokia’s tail will most probably be ambivalent.

Nokia now has at least three quarters of leeway from the market to sort itself out. This is very useful. A good time to get razor focused on execution.

In the meantime, Nokia, set your handset designers alight. (In, er, a positive manner). Set them free and get them really, really innovating. You now need to talk devices — and the story needs to be market leading, inspiring and compelling.

6-9 months from now though, if we are not seeing promising results from the union, those sabres will be rattling again.

Posted via email from MIR Live

By Ewan

Ewan is Founder and Editor of Mobile Industry Review. He writes about a wide variety of industry issues and is usually active on Twitter most days. You can read more about him or reach him with these details.

45 replies on “If you think MSFT is bad news for Nokia, think again”

So all of those of us that has invested plenty of time and money in Nokia and Symbian are now irrelevant are we? Unless we live in some emerging market and want to invest in out first really “connected” device or we make our living “writing” for some “tech blog” based in Silicon Valley then it seems that Nokia, under Ellop, do not give a bloody damn about us.

This can only be a good thing if Nokia is allowed to add to WP7… but then what happens to Samsung/HTC/LG? Do they get nokia maps?

Thanks for the responses thus far everyone. Nokia strongly believes that the planned long term strategic partnership between Nokia and Microsoft can build a powerful ecosystem and deliver leading, differentiated products. This is the start of an exciting partnership and we look forward to the fruits it will bare. Remember to keep up to date with Nokia Conversations for further insight into today’s news.

Thanks for the responses thus far everyone. Nokia strongly believes that the planned long term strategic partnership between Nokia and Microsoft can build a powerful ecosystem and deliver leading, differentiated products. This is the start of an exciting partnership and we look forward to the fruits it will bare. Remember to keep up to date with Nokia Conversations for further insight into today’s news.

@ Gareth. Symbian has been a longstanding part of Nokia for many years and Nokia will continue to leverage the value of Symbian.We currently have around 200 million existing Symbian users and target sales of approximately 150 million more. Considering this scope, Nokia will continue to modernize the Symbian experience with a selective programme of enhancements. However, as Stephen said Nokia’s principal smartphone strategy will be Windows Phone.

I wouldn’t listen to all the noise from disappointed Nokia fans. No, pay attention to the share price (as people always liked to say). Apparently it’s in free fall:

“The initial reaction to the Microsoft news is in and it’s not pretty. Shares down 8.5 per cent. Citigroup is “deeply sceptical” of the turnaround plans and says the investment community is “deeply disappointed”.

MW: Shares were down as much as 12 per cent last time I looked. Investors clearly not sure of the merits of the tie-up. But Nokia faces a difficult dilemma. The company has been way to slow to see the threats from China at the low end of the handset market and new entrants like Apple. And then there’s Android

AW: More from Tim Boddy at Goldman Sachs, who says “investors are unlikely to embrace Nokia’s bold new strategy until it is shown to be working, as Microsoft’s traction in mobile is unproven”.

Tomi Ahonen’s blog is right on the money:

What this really means is a set back for the whole phone industry. Inferior technology, higher prices, in the short, medium and longer term.

Surely this, and similar comments from other Nokia employees on other blogs, is just towing the party line, you’ve been told to get behind the leadership and say what your paid to say.

And what is being said is, unfortunately, just fluff. Without saying and explaining, in detail, exactly WHY this is going to be a win for all involved, consumers and users are going to abandon Nokia in droves over the coming few years.

If this truly is a win, as Nokia would like to have us all believe, people need to have it proven, and very very rapidly.

OK. What is wrong with having a choice? Why not just lump Nokia WP7 phones on North America and give the rest of the world the chance to use a *real* operating system? Why this inane unilateral choice to move Symbian to Windows Phone 7? Oh, yes, don’t worry, those last two were both rhetorical questions. I’m just glad I’m not in the position of being fired for making an operating system that has taken a small Finnish company to the very top of the world.

I can’t honestly see how removing choice as a good thing. And I do not want a “selective programme of enhancements”. But then, what I want, should I say, wanted, dees not really matter does it?

It’s a win, because it keeps Nokia alive in the marketplace. I refer you to
Ewan Spence’s comment contributed the other day. The company had zero choice
on the matter.

To me, this is pretty good news for both sides.

Look, let’s be honest. Neither Microsoft nor Nokia wanted to be in the situation they are in – rapidly becoming non-relevant in the exploding mobile market. But the fact is, that is where they find themselves. Even the credit agencies are thinking about lowering Nokia’s credit rating.

Android and iOS are killing them. Nokia has been locked out of the U.S. market even though they make fantastic hardware. MS took forever and a year to release WinMo 7.

Now, take the two together and I actually believe they can compete. Nokia immediately gets back in the game in North America. MS immediately gets global exposure. It may not work, but on the other hand, what alternatives did the two have.

You take the best-in-breed global mobile hardware manufacturer and the best-in-breed golbal OS software vendor and you should be able to instantly compete.

This is not a “do you think it will work?” issue, but a “what other choices did we have?” issue.

Both Nokia and Microsoft are used to being leaders. They found themselves losing credibility and traction rapidly. This combination can now jointly market their products and get instant exposure.

I would not bet against this duo knowing the quality of their hardware and the experience of their software.

If it is such a nice one for investors, why is the stock down 14%? I think it is a good partnership as well, but apparently the people with the cash doubt it.

Ok, so I’ve had a bit of time to digest the news and get over the first shock. I’m a N8 owner, a proud one until today, so my first thoughts were along the line of Mr. Elop being a Trojan horse, and this being one of the dumbest decisions in tech history. With today’s announcements, Nokia is just another manufacturer of mobile phone hardware. However much they tried to sugar-coat it, the idea of Nokia as a fully integrated mobile company was declared a failure today by the Nokia board. Pretty language aside, MeeGo has been relegated to a mere research project, Symbian will die a faster death than anticipated, and the idea of a Symbian/MeeGo ecosystem linked via Qt is dead.
But let’s get past the shock. What’s done is done, even if I’d rather today’s announcements had been different. Looking at these announcement, and some of the numbers that came out in recent weeks, and adding in some of my own, purely personal experiences as a Nokia owner, a picture starts to emerge, however. One that does not make today’s announcement seem like anything less of a disaster, but at least explains why it might have been unavoidable. So bear with me – I dont’t think this is going to reach the length of one of Tomi Ahonen’s posts, but we’ll have to go over a few things.
First the facts:
Nokia lost roughly 20% of its share in smartphones in the last quarter, which is a catastrophic decline of near-unprecedented proportions. Most of the smartphone sales are at the low end with S60 3rd edition FP2 and Symbian^1 phones, with relatively low profit margins. Nokia shipped less phones last year than it did the year before. This downward trend was widely expected to continue if no changes happened.
The latest batch of smartphones, the Symbian^3-based N8, C7 and C6-01, did not bring about these changes, and specifically failed to regain any of the lost mindshare for Nokia. Nokia is perceived as a has-been in the smartphone space. All discussions about technical merits of different platforms aside, there are reasons why a friend after less than ten seconds with my N8 lost all interest in ever taking a look at it again. I’m not talking about the terribly biased US bloggers – I’m talking actual customers here. The bad press has had an effect at the average customer by now, at least on those interested in smartphones. Another friend first derided me for having bought my N8, and he was incredulous that the N8 had some benefits – wich I demonstrated on his HD-TV. The public perception of Nokia among phone enthusiasts has greatly suffered.
There’s a reason for this. The look and feel of Symbian has not kept up with the times. Beauty may only be skin deep, and I certainly appreciate the underlying benefits of Symbian, but to the average consumer in a shop first impressions matter. I’ve turned off all transitions on my phone, and I don’t care about bling. Most people do. Nokia has failed utterly there. “Customer in shop plays with iphone, Galaxy S and N8. Customer doesn’t buy the N8.” – unfortunateyl this comment sums it up quite well.
“Only the interface needs to be fixed.” – Another comment that comes up often, and one that I wholeheartedly agree wiht. “The basic strategy of migrating from Symbian to MeeGo via the Qt layer is sound.” – I agree with that. The strategy was not just sound, it was the best in the industry. “It’s only with execution that Nokia has a problem.” – Now we come to the heart of the matter.
Nokia was supposed to be somewhere completely different at this point. The feature upgrade for Symian^3 to fix the most glaring problems was originally scheduled for the end of November, then for the end of January, and is still not out. All they managed was a very delayed bugfix update, and this fixed none of the problems that I have with the phone. This for a platform that itself had already been delayed for more than six months. MeeGo, the next generation OS, was supposed to have shipped before the end of 2010, and there were talks of delay until April before it was killed today. The Ovi store still crashes on me regularly. Most Ovi services have been cancelled or offloaded with the Yahoo partnership.
I was wondering. And then last week we saw the numbers for how many people Nokia employs to achieve all these delays and cancelations. That Nokia spends significantly more than anybody else in the industry on R&D. That possibly 5000 people have been working on improvements of Symbian that are laughable when compared with what Apple and Google have done by now – or Samsung with Bada and Palm with WebOS. Sure, they may be technically inferior, cheap hacks for the most part. Sure, Symbian may run on cheaper hardware, is more power-efficient, the new Nokia development tools have done away with the pain – except for where they haven’t. It’s all half-measures, grand plans and not just shoddy, but catastrophically bad execution when seen in light of the expenses involved.
So back to today’s announcement. The basic strategy was sound. The new strategy, joining WP7, is most likely not. WP7 had a bad start, there’s not much support for it, the OS itself is unfinished, and Microsoft has a bad history of vaporware and software development delays. They also have a bad history of screwing their partners in the mobile space over. Going with Android was apparently the first option that Nokia considered, and would have made slightly more sense, but apparently Nokia and Google couldn’t agree on terms.
That the management team and the board now went with the second option, and with one that nobody is happy with, not even the markets who pressured Nokia for radical change, to me shows one thing clearly: that Steven Elop got the board to reasses Nokia’s position, and that they decided that things within the company were so rotten that a turnaround was impossible. To abandon a sound strategy, to give up on the entire vision of what Nokia should be, and to jump into soon-to-be-proverbial icy waters of the North Sea really means that they saw the platform as burning. Only that we misread the platform. The platform is not Symbian, is not MeeGo. The platform was the company itself, were structures that allowed the biggest workforce in mobile software to come to a point were nothing was executed properly anymore. The leadership decided that there was no way to execute the strategy, and with the markets breathing down their back, with the ratings agencies rattling their sabers, they went the only way they could. What happened today was not a rash decision. It was not a decision made gladly, of that I am sure. The precise nature of the decision was open, but that a decision like this had to be made may have been unavoidable for quite a while now. The seeds of today’s change were laid years ago, when Nokia stopped leading the pack.

So let’s say good-bye to the Nokia that was. Let’s say good-bye to the vision of a European, integrated mobile phone and services company. Let’s say good-bye to what could have been. It’s a pity, but it’s done. It is a sad day, but let’s not blame it on Steven Elop.

That’s like telling App developers to continue to develop for us in the mean time but hey we are going to cut our support sometime in 2 years so all your efforst will be wasted by then.

In addition this also telling to consumers about one thing, hey we have this great product called Symbian phones but we are not going to support them for long so have fun while trying.

Don’t be so naive oh dear Nokia, people who invest in smartphones these days whether as developers or consumers will weigh in the sustainability of the Ecosystem which clearly Nokia has decided to destroy of what as it is. Your smartphone lead right now will probably reduce to zero by the end of Q4, as no devlopers or even consumer would be interested to invest a single cent on your current Symbian phones while you still in the process of coming up with WP7 phones which has no direct bridge from Symbian i.e. QT

To me your question is the question of the day… If Samsung/HTC/LG stop making WinPhone7 handsets, then here’s what the smart phone world looks like…(in no real order)

Vertically integrated OS/hardware offerings
RIM/BlackBerry OS and QMS
Nokia/MS WinPhone

And then you have Google + (the + being all the OEMs that make Android handsets).

There’s no way that we should discount the potential of the Nokia/Microsoft deal, but it will be all about execution. If they are successful, then in 12 to 18 months, perhaps we’ll be talking about the demise of the Blackberry OS, Web OS, and Bada.

JFH, I think we have to differentiate ‘the market’ (as in share price) from
‘the market’ (as in the wider tech community). A 14% drop is certainly
dramatic, however Nokia is — at least — still in the running. I don’t
think we’re seeing many ‘Nokia-is-dead’ comments now. We’ve moved on to
discussing Nokia vs Microsoft and their ability to transition and execute.
This, then, is good news. Because previously Nokia was considered to be
ultra irrelevant.

No one disagrees that Nokia needed to stop the bleeding. Most everyone was just thinking that Nokia would at least leverage its Qt framework to WHATEVER platform it decided to use, and not just bastardize its IP like it has.

Most of what you said made alot of sense. But what doesn’t is why help MSFT save their sinking mobile ship without getting some consessions of your own??

Nokia is huge like MSFT. They had leverage to work with MSFT, since they had other suitors. They could have demanded MSFT officially support and help port Qt to WP7 and the new WinCE. THAT would have been what would have gotten my juices flowing, grown developer confidence, AND brought the carriers on board, not to mentioned salvaged SOME of the Ovi services wing.

This is just tech suicide.

Save it, Clair. Seriously. A simple collaboration, and not an abandonment of Nokia IP for MSFT, would have been a wiser choice, but Elop has no balls, and now our stock is worth tokens at Chuck E. Cheese’s. What did Nokia GET from this beside carrier love in the US? What did it do to adress its open source fans, Linux fans, and Microsoft battling heritage? Nada. Just a poke in the bum, no lube added.

If this is to get them into the US, perhaps they should know that NO ONE here wants WP7. AT ALL! Ask around. I live here, so I can vouch.

If this is to get them into the US, perhaps they should know that NO ONE here wants WP7. AT ALL! Ask around. I live here, so I can vouch.

No Qt for CE/WP7 basically means they won’t have much leeway, and that’s the bad part. Stupid stupid eFlop…

No Qt for CE/WP7 basically means they won’t have much leeway, and that’s the bad part. Stupid stupid eFlop…

Nokia could only PRAY everyone else stops making WP7 devices to allow it more influence, but I doubt that happens soon if at all. No one is buying it anyway, its a downgrade from Symbian in everything but eye candy and gaming, and its a bad move that will cause stock to flounder for months to come.

“Only the interface needs to be fixed.”

Umm…yeah. When I read statements like that, doorbells go off. Nokia’s problem is a “lipstick on a pig” problem…they’re problem is that Symbian devices look as though they’ve been designed by and for stoic finnish engineers. Saying, for example, that transitions are just “bling” means that one doesn’t understand how a person’s experience with digital media is affected by state transitions. And that’s where Nokia has seriously failed in so many major ways. I’ve never had a pleasant experience on a Nokia device, and having worked on lots of mobile apps from 2003-2007 I used plenty of them. They “functioned” in an acceptable way, but I always wanted to tear my hair out after fighting their UI…or pressing the cheap buttons…or fighting the cramp in my hand from holding it. They’re products may be the ultimate example of design completely divorced from function…too bad to because I’ve always thought they did excellent research and conceptual work.

I wish them the best with WM7. I agree it’s their best move at this point, although it’s not saying much. I anticipate they’ll probably get acquired by M$ in the next couple years so that M$ can pretend they’re Apple.

I didn’t say that Nokia’s problems were superficial. A lot of the changes that would have been needed on Symbian would have been superficial, but the fact that Nokia either did not manage to bring about these changes, or did not see the problems points to problems within Nokia that were anything but trivial. If you’re so stuck in your ways that you for example ship a phone with an icon set that everybody out there, including most Symbian die-hards, thinks is completely outdated, then this is bad. This is just one example of something that Nokia should have allocated resources to and didn’t.

Ovi is a silly name anyway.
No really, Ovi struggled to make sense to anyone outside the tight-knit mobile industry. Who outside the industry can explain what Ovi is or does?

Oh yes, certainly Claire. I will make sure that I “keep especially up to date” with Nokia Conversations. A saccharine corporate blog is most definitely the best place to get unbiased, objective tech info. Thanks so much for reminding me.

Re the 14% share price drop, while certainly dramatic, could it be argued that’s where it would have headed or worse in the not too distant future given its market share declines and seeming inability to innovate software (and when I use that word I include ‘get it to market’ in the defintion)?

This post for me sums up my biggest fear with this deal, and its about competitive advantage / differentiation. Nokia will now be part of a Nokia HW / WP7 SW offering competing with other hardware manufacturers also offering WP7 as well as those running iOS and Android. In todays mobile phone market I would argue people buy phones on the basis of a combined HW / SW / Ecosystem consideration. Can the Nokia / WP7 combination compete on that basis? You’d argue Noka ought to be able to deliver great HW but is the rest of the offering good enough?

Why did Nokia choose Microsoft, or vice versa?

BlackBerry- RIM has a similar problem to Nokia in that the software does not reach the level of the hardware and this is what is causing a loss of market share. An alliance between the two would make so sense at all and would create mass confusion outside and inside the organisations.

Android- This to me still makes the most sense for Nokia. The charge against this move was that Nokia could not differentiate itself enough against the competition if it used Android for its smart devices. This is of course complete nonsense now that it has chosen Windows Phone which, if anything, lessens the opportunity for Nokia to stand above the crowd even more. Think about it for one moment- in 6 months time you could go out an buy a new Android phone from HTC, Samsung, ZTE or Nokia. Which would you choose? I am confident that I would go for a Nokia-Android phone above the rest. Nokia knows how to make phones that work, Nokia knows how to deal with signal, battery and all of the other aspects that make a good smartphone practical. Nokia knows how to design good looking phones that appeal to the masses and often at very competitive prices. Nokia could design a huge range of mobile phones that take in the entire price range using Android and would have a relative standard of freedom to boot. There would be problem areas, but I do wonder if a huge opportunity was missed with a Nokia / Android tie up. And I mean missed by Google. Google can afford Nokia, but I guess it stayed away for fear of pushing the likes of HTC away from the Android stable. But where would HTC go? Besides Android, the big manufacturers are not making big bucks on any other platform so they would probably have to stay put and compete with a Google owned Nokia.

iOS- No I haven’t gone mad, but I have wondered about a world where Apple let Nokia build iOS handsets. What better way to combat the threat of Android which could potentially dominate in a way we have not seen in the mobile industry before. It would never happen because Apple wants, and needs, to control the software and the hardware, but as a theory it has some merit.

webOS- Nokia should have done everything possible to buy Palm last year, but it didn’t happen. A tie-up with HP was a possibility, but I suspect that HP is putting a lot more into webOS than we realise at this time. Mobile is the sector of the moment and a company as large as HP will want a part of that. It simply doesn’t need to share that potential with anyone else.

So we are left with Microsoft and Windows Phone. A mobile OS which has spectacularly managed to not set the mobile world alight. An OS that doesn’t have enough within it to compete with the likes of iOS and Android at this time. There is a good argument that you cannot fight iOS or Android by dancing with the devil and that two other companies needed to bring their expertise together to compete. I get that, but I feel that Nokia really had no choice, but to go with Microsoft for two reasons. For a start there was no one else they could get into bed with and it is likely that this was the plan many months ago- just look at the moves of MS people into Nokia.

Can two companies with the expertise of Nokia and Microsoft make something good out of this partnership? Maybe, but there are significant challenges ahead. Symbian is supposed to be resigned to the budget end of the market in the future, an OS that is not particularly easy to use and one which will come under huge competition should Apple decide to release a cheaper iPhone, and let’s not forget the budget Android smartphones which are selling in healthy numbers already. Symbian will go for sure.

Many of us will have looked at the announcements from Nokia, Microsoft and HP last week and thought that they showed promise. In a week when Apple and Google said nothing these announcements merely showed promise. No killer blows, nothing to make us wait with anticipation for the results of these announcements to come to fruition and we haven’t seen what Apple intends to do next.

I personally feel more hopeful for HP than I do for the Nokia Microsoft partnership, but I am not going to discount the possibilities. Apple and Google have it easy at the moment, but still need to work very hard to stay ahead. I’m still not convinced that the others did enough last week to make them work much harder.

<personal opinion>
I can see the point and the fact that we can officially see an end will undoubtedly put a lot of people off, but also remember that there are many many millions of those devices in use today and also for the next few years. At least support isn’t being dropped immediately, and there is still the same chance to make a good product and good money in the mean time.

There is also a chance that a developer making good stuff for current platforms will be noticed and maybe helped out for the transition, who knows.
</personal opinion>

ovi = door (finns word) …an ovi is apps store ,and ovi (nokia) maps …i guess bing sounds better….

Actually eka, Bing is just as silly and I will tell you why. Both ovi and Bing were in direct response, and imitations of, competition innovation. If the market leader sees their competitor raise the bar significantly to overtake them (think Nokia with Apple, think Microsoft with Google) you strategically innovate and forward the industry with your new innovation (like Android did in response to Apple). If you haven’t the ability to innovate and you prefer to copy, your offering needs be 2x better. ovi was neither.

Nokia’s ovi was a pale imitation of the app store. It was the easy way out (“hey, let’s just copy”) rather than requiring real creativity and intelligence to enable Nokia to reclaim the initiative. In other words, ovi was a cynical exercise from an arrogant bureaucracy who believed that they really didn’t need to try anything creative or innovative in order to knock of the Apple upstarts.

They are now paying a heavy price – one could say, that Nokia is on the wrong side of history.

btw, I did now about the ovi = door connection. Would have been a good idea if it was better thought through.

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