Nokia and Microsoft, charging elephant or beached whale?

The announced collaboration between Microsoft and Nokia could become a troubled relationship. Both Nokia chief Stephen Elop and Microsoft's president of mobile Andy Lees have been telling the world that the new collaboration is good for all concerned but the market has reacted sceptically, with Nokia's stocks diving consistently for the past few days. What makes the marriage a rocky one is the fact that both Nokia and Microsoft are coming up from behind. Sure, Nokia has the largest market share worldwide if all mobile phones are counted. However when it comes to smartphones the numbers are quite different. And pretty soon, nearly all phones will be smartphones.

Miniaturisation and faster, cheaper processors are cropping up making smartphone functionality no longer a top of the range feature only. Android will be the choice for most manufacturers because it is easier to adapt to watered down versions for the lower end smartphones. It is cheap and well established by now. Windows phone 7 is still a long way behind when it comes to stability, features and developer proficiency in writing software for it.

At least the link with Nokia will give developers a reasonable expectation of volume when it comes to the Windows Phone 7 platform but if the platform fails to perform its duties in the field, both Nokia and Microsoft will look more like a beached whale than a charging elephant. And Microsoft's track record in making reliable mobile operating systems is not something to boast about.

Why Windows Phone 7 may have a chance

Let's begin with a little perspective. The mobile phone OS market is ruled by Nokia's Symbian with 41% of the market. Next comes RIM (Blackberry) with 18% followed by Android, 17% and Apple's iOS at 14%. Microsoft (5%) is just one of the rest that can be found in the last 10 or so percent. So they are not a big player at the moment. (Source: business insider.)

Microsoft's phone OS's have historically been plagued by bugs and hang-ups so their track record of producing a reliable phone OS is not great. The debacle with their Kin devices does not help to induce a happy glint in the eyes of prospective phone buyers.

So it is pretty easy for analysts to predict Windows Phone 7 will flounder. Yet I think Microsoft may have a chance. They will not become the market leader overnight, that is certainly true. But they do have a very striking OS if the pre-release video's and screen shots are anything to go by. And striking is good in a market that is slowly congealing into a standard way of doing things. There are always those among us who want to distinguish themselves and Microsoft may just offer the OS to do that.

Apart from the look and feel of the OS there is another factor that may help Microsoft. Although Nokia is the world leader with their Symbian OS, they will not remain that for long I think. Their new version of the Symbian OS is clunky and not very slick. As a matter of fact it looks like Symbian is going the way of the old Microsoft Mobile OS's. Building a patchwork of features on a once successful OS without looking around you what is happening in the marketplace. The stubborn adherence to their own OS instead of adopting Android for at least some of their smart phones is going to become the death knell for Nokia.

Although both Android and iOS are a long way from Symbian in terms of market share they are miles ahead when it comes to OS quality and ease of use. And this will filter down to the buying public's consciousness sooner rather then later and things can change awfully quickly in a market where every couple of months new devices are presented, and more importantly, bought!

With the possible demise of Nokia - regarding smart phone market share, I don't predict Nokia as a company to go out of business any time soon - there will be a vacuum in the market that needs filling. The obvious beneficiaries will of course be RIM, Android and iOS but the freshly made over kid on the block may have a good chance of muscling in on the action.

Fresh looks and a shift in the market may be the reason why Windows Phone 7 has a chance in a fiercely competitive market. The one thing that will determine how Microsoft will fare in the market share stakes by this time next year is how well the OS performs. It will be put under the microscope, be dismantled layer by layer and squeezed and prodded by almost every tech blogger out there and if it turns out that the pretty face is hiding a monster, Microsoft will remain an also ran. My thoughts go out to Steve Ballmer, who's bonus was already cut due to the poor performance of the mobile OS department of Microsoft. He must have some pretty sleepless nights in the run up to his new OS's release. It would be a sad sight to see him putting his archetypal presenting skills to use selling match sticks in the street if Windows Phone 7 fails.

Nokia: struggle to remain relevant in smart phones

Nokia N8
(Image copyright Nokia, 2010)

The world is changing. Yesterday's sure bets seem less of a winner these days. Microsoft was once the only player in the OS market that mattered. These days, the alternatives are getting more viable by the minute and Windows is far from the only valid choice when choosing an operating system for your laptop, desktop, phone or tablet.

The same goes for the mobile phone market. Nokia used to be the safe go to manufacturer only a couple of years ago. Now, with smart phones taking over the mobile phone market, they struggle.

There is a parallel here: if market share meant anything in determining a company's future, both Microsoft and Nokia would be as safe as houses. But as both companies know, market share is in fact as safe as houses proved to be during the sub-prime disaster. It turns out that customers are fickle beasts. Brand loyalty only goes so far. If a manufacturer does not provide the right feature set and - more importantly - the right user experience, the public looks elsewhere. And Nokia has not offered the right user experience for some time. The Symbian operating system has grown old and stale compared to the iPhone and Android alternatives. It is clunky, looks unattractive and involves to many button pushes or screen taps to get you where you want to be. It was good in its day but not anymore.

In a rousing speech yesterday, Nokia's top marketing man, Niklas Savander, tried to convince a developer-audience that Nokia means to revitalise the brand. New smart phones, running new OS's will make them relevant again in the smart phone market. He even took a leaf out of Steve Jobs' book when he jibed, "One more thing, they perform, day in day out, no matter how you hold them." This of course is when Murphy pokes his head around the corner and makes all Nokia phones go "Oomph!" and lets those reception bars go the way of the dodo. Better not to joke at your competitors expense!

I am sceptical on Nokia remaining a relevant smart phone manufacturer. Their market share in the US is negligible and although they sell huge numbers of smart phones worldwide - some 260,000 a day according to Nokia themselves - I doubt whether the new N8 flagship phone with the 'new' Symbian^3 operating system is going to do it. With smart phones leaving the high end market and entering the 'every one's phone' market, the OS is going to become more important than ever.

You see, reading some reviews about the N8 some people may like this phone. It has some niggles but also some nice features. But that is not going to cut it. To stay relevant in the smart phone market Nokia does not need a phone that is just all right. It needs a phone that blows both the iPhone 4 and the Android contenders out of the water and the N8 running a Symbian OS is not going to do that. It is going to be an also ran. And an also ran is not enough to sustain a huge company like Nokia.

What would save Nokia? Maybe a 4" smart phone flagship running Android with the build quality of a tank and a camera that rivals a SLR would. They need to bring out a phone that promises its user uninterrupted use and loyalty, even when the competition has moved on during the contract period. In other words, they need the modern equivalent of my old and venerable N82, which I still use every day!