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Microsoft and Nokia

A few weeks ago came the surprising but not totally unexpected news that Microsoft was purchasing Nokia’s handset division. Since the day Stephen Elop announced the partnership with Microsoft to run Windows Phone, many pundits had predicted that something like this would eventually happen. When the news broke, there were many snide comments of Trojan Horse being bandied around amongst other things.

Lots of comments lamented the sale, with people saying that if only Nokia had embraced Android or continued with Meego, they would have been in a much better state. I dispute these claims, and this is why:

  • In the Android world, Samsung is the 800lb gorilla in the room. Samsung ran early with Android, and this came back to reward them as they racked up huge sales of the Galaxy S and S2. It’s also tough to compete when Samsung itself pretty much makes every part needed in a phone. This vertical integration has killed or wounded just about every other competitor in and out the Android world. Even Nokia at their prime didn’t have this level of integration. Witness how every other company is fighting for scraps.
  • Meego was pretty and earned some very enthusiastic reviews. However, as Elop pointed out in his “Burning Platform” memo, it’s not so much about individual phones anymore as it is about platforms. Meego didn’t have a very large platform to start with, and in all honesty, Nokia didn’t have the financial muscle to make into a large platform. By the time Nokia switched, the Windows Phone platform had already started to pick up a nice head of steam, though it was still a bit player compared to Android and iOS. Without the apps that were popular on other platforms, Meego would have died a slow ignoble death. Look at BlackBerry, who chose to stick with their own new platform of BB10. That is what would have happened to Meego.

What I find very odd is all the people who would simply be happy with an iOS/Android duopoly in the phone world. That would simply lead to ultimate stagnation. The worldwide market is big enough to support 3 players, and Microsoft is a company who needs to be in mobile to help draw and retain customers to their entire ecosystem. BlackBerry is a faded star in the phone world, and their future increasingly looks like it will be either one of being sold, or broken up for various sub components.

There will be some interesting times ahead, no doubt. Microsoft needs to tread very carefully so as to not disrupt the steady growth of Windows Phone, thanks largely to Nokia’s Lumia phones. That being said, having the handset division as part of the mother ship now, Microsoft may be able to innovate quicker and churn out products even quicker. The handset division now has an effectively unlimited budget to work with, so expect greater marketing and hopefully even more wonderful phones.

Lastly, the Nokia mother ship itself frees itself of a division that was causing it to sink. While the company will now be a lot smaller than before, it frees itself to compete better with its NSN division and the HERE maps platform. Nokia becomes more nimble to move and continues to live on, having reinvented itself yet again.

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