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Nokia/Microsoft partnership - Winners and losers

Summary: So, Nokia is to partner with Microsoft and replace Symbian with Windows Phone as its primary operating system.

Adrian Kingsley-Hughes

By for Hardware 2.0 |

So, Nokia is to partner with Microsoft and replace Symbian with Windows Phone as its primary operating system.

Note: Live blog coverage here.

So who are the winners and losers from this partnership.

Well, undoubtedly the biggest winner is Microsoft. Not only does this move mean that it will inevitably make significant gains in Windows Phone marketshare, it's also managed to eliminate Nokia's Symbian OS as a competitor. Also, it's managed to win over an OEM and get them to effectively dump their own established ecosystem in favor of its embryonic ecosystem.

Microsoft also gets its hands on Nokia's Ovi/NAVTEQ mapping assets. Given the number of times this was mentioned at today's live event, I think that this is what Microsoft wanted more than anything. No word on how this will fit into the WP ecosystem - will the technology be licensed to other handset OEMs?

What about Nokia? Is it a winner or a loser? Well, the company is fighting for survival, and this deal no doubt guarantees its survival for now. But it's hard to see how in the long term Nokia can do much to differentiate itself from other OEMs. Sure, Nokia makes some good, solid hardware, but it's this good solid hardware (over-engineering some might say) that got the company into the mess it's in. Today Nokia truly becomes just another Microsoft OEM. The company has managed to gain more freedoms than other WP OEMs (more on that in a moment), but another OEM it is nonetheless.

It's definitely a bad day for Nokia employees. There were strong suggestions that this move would mean job losses at Nokia.

It's also a bad day for Google. "Why Google?" you might ask. Because in choosing a new platform for its products, Nokia went with Microsoft's WP platform rather than Google's Android platform. Nokia's reasoning behind going with WP over Android is that it felt that going with Android meant that it would "one of many" and that value was being moved from Nokia to Google.

It could also be a bad day for other Windows Phone OEMs. During today's Financial and Strategy briefing, Nokia CEO Stephen Elop said that the company had a "unique relationship" with Microsoft, and that the deal was "not your mother's OEM deal with Microsoft" and that the deal also allowed Nokia to differentiate itself from other OEMs. Elop said that no details of this deal would be released, but all this talk of a cozy relationship between Microsoft and Nokia must make other OEMs uncomfortable. Nokia has already talked a lot about creating differentiation within the WP ecosystem and come up with unique hardware and services that will only be seen on Nokia handsets. Elop even suggested that Nokia had the power to change the WP UI to suit its needs, something that no other OEM can do. 

No word on handsets, pricing, release dates and so on ... so plenty of blanks to fill in.

More coverage:

Topics: Microsoft, Banking, Hardware, Nokia, Operating Systems, Software, Windows

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75 comments
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  • Winner: Current WP7 users

    As a current WP7 user, the only thing that's missing is the apps. With developers now having access to a huge distribution base (almost overnight..oh wait, actually overnight), developers have a huge incentive to focus their attention on making apps for WP7. Android app development really was not that strong until OEMs began using Android in mass. I expect to see rapid growth in the WP7 marketplace. Win for me.
    retnep
    Reply Vote

    • Good for you and Balmer! Bad for Nokia!

      This move will make ~$700+ million for MS's E&D division selling around ~70 million phones. (10 dollar MS Tax).

      This places Nokia at a disadvantage when it comes to smartphones. they will cost 10 or more dollars than the competition.

      In the developed world this isn't much. But Nokia has very little presence there. Nokia is huge in the low end market, where people dont spend more than 50 dollars on a phone a 10 dollar tax will mean that competition will offer phones with 10 dollars worth of more features.

      Nokia stands to keep on squandering market share. The next course correction will be in about a year, if Win 8 doesn't come through.

      Sales will keep on dropping through 2012.
      Uralbas
      Reply Vote

      • RE: Nokia/Microsoft partnership - Winners and losers

        @Uralbas
        Have to disagree with your assessment. Nokia has massive distribution agreements with carriers in Europe that ensure sales. Symbian is one of the worst operating system for a smartphone, yet it still leads or nearly leads in sales. This is because individual carriers are likely to carry multiple types of Nokia phones all running Symbian with only a couple of offerings from Android and RIM.

        I'm not sure about your comment about Win 8. WP7 is probably the best, most responsive, UI that I've used on a smartphone. There are some flaws, but the flaws are minor and correctable.
        retnep
        Reply Vote

      • RE: Nokia/Microsoft partnership - Winners and losers

        @Uralbas
        The Low end Nokia phones that you are talking about has nothing to do with this deal. They run S40, and will continue to do so. Nokia is not going to be WP7 only company, never. It's market is so big that it can be selling S40, Symbian, Meego, WP7, all types of phones together.
        Raju Das
        Reply Vote

      • RE: Nokia/Microsoft partnership - Winners and losers

        @Uralbas : I think Nokia's is world famous for ill-fated, game changing agreements. Remember the Symbian Foundation, which now is almost extinct. Remember Maemo, which never got anywhere. Remember MeeGo, the useless combination between Moblin and Maemo, which wreck havoc on the Intel side, just to support the ill fated purchase of Qt and created a platform nobody cared to develop (Qt Quick). Now they speak about Windows Phone 7. Do they have the "anti Midas" touch.
        We'll see.
        cosuna
        Reply Vote

    • RE: Nokia/Microsoft partnership - Winners and losers

      @retnep - No, Microsoft has exactly a 0% larger "distribution base" (i.e. market share) today compared to yesterday. Nokia is planning it's first WP7 phone for the end of the year and only then will Nokia start to add to the WP7 share. Meanwhile all the other WP7 partners, much as they try and put a good spin on it, have another reason besides poor sales to ignore their WP7 efforts. And all those partners have a great other OS to fall back on (unlike Nokia) in Android.

      This move stagnates WP7 for 2011 and goes all-in on the hopes that Nokia can do something magical.
      rbgaynor
      Reply Vote

    • RE: Nokia/Microsoft partnership - Winners and losers

      @retnep

      Agreed. Good for all consumers. Don't know why the fan bois are afraid of competition. Shrug...
      NoAxToGrind
      Reply Vote

    • Access to a hugh distribution base... overnight?

      @retnep : well... not really... Nokia's gonna take minimum 2 months to release an ODM <i>badge-engineered</i> phone. Even longer for a true Nokia phone. Then it's gonna take a while for resellers to understand the new phones, integrate them into their pipelines and leverage the system.

      Also, Nokia's a no player on <b>real</b> smartphones, so my best bet would be that in order to avoid a direct competition with the other WP7 OEMs, they will target feature phones at least until they see WP7 mature enough to compete in high end (iPhone 4) and mid tier (Droid 2, Pre3, iPhone 3GS, etc).
      cosuna
      Reply Vote

    • RE: Nokia/Microsoft partnership - Winners and losers

      @retnep
      I am not convinced by this argument, but it is certainly an unusual way to view the situation:
      http://www.macworld.com.au/news/analysis-nokia-microsoft-deal-is-a-win-for-apple-24333/
      Restricted_access
      Reply Vote

  • loser nokia

    never make a deal with MS what ever the situation look what happen to novell
    Quebec-french
    Reply Vote

    • Well, let's be honest

      @Quebec-french

      Novell had very little to offer. It was all about the Linux deal anyway, so Novell got some much needed cash--and little else except MS support and freedom from potential litigation.

      But Suse Linux was just another linux, really...and it could be had for free. Not much profit in free, even charging for support. Just ask Red Hat.

      Novell's always been a bit of a bit player anyway--yet another one trick pony.
      wolf_z
      Reply Vote

      • Not much profit?

        @wolf_z <br>Maybe for Novell but Red Hat made 748.23 million in revenue as of last year.
        Zc456
        Reply Vote

      • RE: Nokia/Microsoft partnership - Winners and losers

        @wolf_z - Revenue means nothing. Measure a company's performance on it's profits - it's ability to make money.

        For FY2010, RedHat MADE $87.3M in profit. That's it. That's barely enough to pay for a few conferences and fund R&D to continue to differentiate its products from mainstream Linux.

        To put this in perspective, Microsoft generates $87M in profit every 21 hours.
        bitcrazed
        Reply Vote

      • bitcrazed: profit, sales, market cap, price earnings

        @bitcrazed
        You're clearly trying to say "Microsoft is so much better than Redhat".

        Well as an investment, Microsoft would be about 8 times better in terms of Price/Earnings, as RHT (redhat) Price/Earnings ratio is 89, Microsoft is 12.
        Note: Microsoft was formed in 1975, Redhat in 1993, making Microsoft twice the age of redhat.

        During Microsoft's phase of expansion however, they didn't dividend anything, meaning PE ratio was effectively infinite: at the end of 2001, Microsoft's PE ratio was 60.

        Many people (especially Microsoft) predicted that there was no way to make money out of Free Software, and that redhat and other corporations based on free software would bomb. However they haven't, and in fact, have been burning up the non-free software market. (in the same way that computers burnt up the typewriter market, and the typist market).

        Redhat's Market Cap has increased by a factor of 8 since end of 2001, while Microsoft's has halved.
        It's interesting to note that if the trend continues over the next 10 years, then by 2021, Redhat will be nearly comparable in Market cap to Microsoft.
        at that stage, Redhat will be 28 years old, or effectively at the age that Microsoft was when it released Windows XP.

        The fact you have nearly a billion dollar corporation selling free software, and it's 18 years old, it quite a thing. So many people said it couldn't be done.
        stevey_d
        Reply Vote

    • RE: Nokia/Microsoft partnership - Winners and losers

      @Quebec-french

      Novell waited until they were dead. Nokia is acting far more proactively.
      Mythos7
      Reply Vote

  • RE: Nokia/Microsoft partnership - Winners and losers

    As you say Adrian, a significant issue is this may horribly backfire on MS with it's existing partners for WP7 and it's going to have to do a lot of stroking to keep them happy, this would have made a lot more sense if it had been an exclusive deal. Android has already commoditized the smart-phone market as MS did when it outmanoeuvred IBM for PC's so it's still going to be tough going for WP7.<br><br>A point to note here is that this is just the deal stage and no phones have actually been designed yet so there is going to be a significant time lag before anything comes to market, in the meantime things will have moved again.
    Alan Smithie
    Reply Vote

  • But can they execute it...

    I have WP7 & love it... so I'm excited about this deal. It definitely looks good on paper... but can they execute it properly? I guess we'll see. If Nokia can get some quality WP7's to market in the first half of this year, then that would be a good thing. If we don't see them until 2012, then that seems like a problem (in my non-expert opinion). The mobile world is moving rapidly. Microsoft & Nokia need to move... now.
    empirestatebuddy
    Reply Vote

    • RE: Nokia/Microsoft partnership - Winners and losers

      @empirestatebuddy - Nokia said first handset at the end of this year - that's a long way off.
      rbgaynor
      Reply Vote

  • Winner: European Carriers

    European carriers who have hitched their wagons with Nokia as their primary phone distributor have to be jumping for joy today. When the NWP7 roles out, many of these partners will have absolutely 'new' products to sell. I have to imagine that these carriers saw how Symbian was lagging in features and begged Nokia to change. As a customer, your options are to either buy the device your carrier offers or switch carriers. If all of your carrier's phones are inferior to the competition, it's a lot more likely for you to switch.

    Nokia's market share reduction is as much about carriers reaching out to other manufacturers for phones as is for customers picking different phones. With a new product to push, these carriers can continue their existing partnerships with Nokia and still be able satisfy their customers with a brand new experience.
    retnep
    Reply Vote

    • Well, other manufacturers will smell blood, and probably go after the EU

      market. Nokia with WP7 will not necessarily be well received by Europeans, and this might be a big opening for Apple and Android OEMs.
      DonnieBoy
      Reply Vote
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