Don't fight yesterday's war: Can Nokia fix Microsoft's mobile problem?

Don't fight yesterday's war: Can Nokia fix Microsoft's mobile problem?

Summary: Microsoft has completed its mega-acquisition of Nokia's handset business, but where does it go from here?

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Microsoft today finally completed its acquisition of Nokia's handset business; now the real work starts.

The Nokia acquisition was one of the last big decisions made by former Microsoft CEO Steve Ballmer. It's now down to his successor Satya Nadella (who was apparently initially against the deal) to make it work. The Ballmer era 'devices and services' strategy seems to have been replaced by Nadella's 'mobile and cloud-first'. That shift in emphasis could be a significant one for the company.

It's essential to never lose sight of the big picture with Microsoft. The desktop PC was the key to business software market, and Windows and Office allowed Microsoft to build an unrivalled position there. Enterprise software is still the biggest part of Microsoft's business, but getting mobile right is essential to the company's future in the long term. The importance of the PC has been declining for some time as companies are moving their applications and data to the cloud, and workers are happy to access those applications and data from tablets and mobiles

As such Microsoft desperately needs to be strong in mobile to protect its core business of selling software to enterprises over the next decade or more, and find new customers in emerging markets who will probably never buy a PC at all.

Microsoft managed to dominate the PC without having to build PCs, leaving that Dell, HP and the rest. And you can be a big player in mobile without making any phones yourself — Google has proved that with Android.

Until now the problem for Microsoft has been that few mobile phone makers other than Nokia have bothered to make Windows Phone handsets, and consumers haven't warmed to those that did make into onto the market. The thinking behind the Nokia acquisition seems to be that Microsoft can now be guaranteed that there will at least one company still building Windows Phone devices, even if it is Microsoft itself.

A look at the market share numbers show the mountain that Microsoft will have to climb in mobile if it wants to become a serious player. According to IDC in the last quarter of 2013 Windows Phone held a mere three percent of the worldwide smartphone market, and Nokia's handsets accounted for 89 percent of that. In contrast, Android had 70 percent of the market, and Apple's iOS 21 percent. And neither Nokia nor Microsoft's attempts to build a successful Windows tablet to rival the iPhone (the Surface line and Nokia's 2520) have met with little more than a lukewarm reception, either.

During Microsoft's Q3 investor call Nadella sketched out a vision of a world five to 10 years from now where computing is ubiquitous and "where all experiences are powered by ambient intelligence". He talked of computing power built into new form factors, the importance of cloud, and of Microsoft adopting a 'challenger mindset'. All of this is sensible and an acknowledgement of how the environment has changed.

Microsoft needs to pour all of this into its plans for Nokia. Microsoft needs to be a giant in mobile, but that doesn't mean it has to be a giant in mobile devices. This is where 'mobile first, cloud first' could be different to 'devices and services'.

Trying to simply build 30 or 40 percent market share for Windows Phone is both unlikely and risks fighting yesterday's battles. Microsoft needs to have a broader approach to mobile, one that is not wedded purely to Windows Phone.

It can't replicate the Windows PC world again, and may finally accept that now. Even before the Nokia deal was completed Microsoft bowed to the inevitable and made a version of Office available for the iPad. Similarly, its recent decision to make Windows free to hardware manufacturers building phones and small tablets might help it claw back some customers from Android.

Another example of a new way of thinking: Nokia has been experimenting with an Android phone, which could be an intriguing alternative way to encourage new smartphone owners to use Microsoft's services even if they don't want to buy a Windows Phone device.

Already the next battlefied is evolving in mobile: Google and Facebook are looking beyond the smartphone and tablet to the next big things (wearables and virtual reality); Nokia has always been known for its excellent hardware and in combination with a cloud powered intelligent assistant could make an interesting play here.

Microsoft's decision to buy Nokia shouldn't be about taking on Android and iOS head-to-head, but about infusing a mobile first culture through Microsoft. 

Topics: Mobility, Enterprise Software, Microsoft, Nokia, Smartphones, Tablets, Windows

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26 comments
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  • Microsoft FREE for 3 years and loving it

    3 years ago, I completed my switch to iMac to replace Desktop and Laptop & iPad... Best decision Everrrrrrrrr....

    We had a network, I was a Microsoft Guinea-Pig where I had the privilege to keep paying for their fixed up (upgrades) f'up... I think MICROSOFT should be prosecuted for legitimizing mediocrity...
    amid@...
    • Of course you did, amid@...

      of course you did...

      ;)
      William.Farrel
  • As A Fellow Mac User...

    ...and a Windows User (yes that IS such a thing. Using both OSes.) I ask this-- why should you think that MSFT should just fold up due to your previous experience?
    SoftBankColumbia
  • Don't fight yesterday's war: Can Nokia fix Microsoft's mobile problem?

    What is Microsoft's mobile problem? They just released strong mobile sales for the Microsoft Surface. The Microsoft Windows Phone operating system has had year over year growth. No problem needs to be fixed but this acquisition will improve where Microsoft stands in the mobile arena.
    Loverock.Davidson
    • Microsoft's problem is...

      ...they want the mobile space to be a three horse race: iOS, Android, and WP. Well, the market has already chosen. And buying a burning platform doesn't change that fact.

      WP was and is DOA.
      CornheadsBack
      • DOA?

        It's the fastest growing platform right now. How does that make it DOA?

        While WP does struggle in the US (due to many factors, including poor salesmen at the carriers), WP does do well internationally in many countries. Just because you don't value it, doesn't mean there aren't millions that do. And the US is NOT the only market that matters.
        spaulagain2
      • Year over year growth

        And somehow they are DOA. That is hilarious.
        Loverock.Davidson
        • If u sell 100 WPs last year

          Then 200 this year, that's 100% growth and I can shout from the rooftops and brag on ZDNet but it still doesn't change the fact that only 200 people bought my.phone.

          WP is DOA and will always be single digit market share. The market has already chosen and it wasn't WP.
          CornheadsBack
      • Your problem, CornheadsBack

        is that your so biased against MS that don't want MS to compete. The market chose what was available at the time, nothing more. Now they are moving in a direction that you apparently don't want them to.

        So what is it that bothers you? that people that do like the platform bought differently then you?
        William.Farrel
    • The problem

      Microsoft is a little bit more ambitious than you - 3 to 5% it's not "strong sales".
      Regarding the acquisition - Nokia did a good job with WP, as I see it the problem was the WP platform. Can Nokia chunk going to Microsoft teach them? Maybe.
      AleMartin
      • The thing is

        For a MS shill, single digit market share is a FANTASTIC success. No amount of reason can convince them otherwise. They will interpret any growth no matter how small or insignificant as a trajectory to the former dominance enjoyed during the desktop era.

        WP is DOA.
        CornheadsBack
        • That's funny...

          And here, we watched the Apple fans boasting OS X gains of single digits within the PC market.

          Double standards, I guess?
          ForeverCookie
          • I don't think it is news

            That the shoe is on the other foot for MS. The thing is most of the commenters on ZDNet are still in an alternate reality like Ballmer when he laughed at the iPhone.l
            CornheadsBack
          • He was technically right

            The iPhone didn't really pick up in the US until it was subsidized by carriers.
            Michael Alan Goff
        • To think any other way

          would be financial suicide. Promote your success to give corporate confidence. There is no other way to do business. Anything less is Succumb.
          nesdave
    • WP problems

      it doesn't matter WP has finally catch up in phone features parity with IOS and Androids, the biggest problem is nobody like Microclock phone. It is karma for them to treat customers as cash cows, to extort and eliminate competitors, to backstab partners, lazy to innovate, etc. It is a dead platform. Almost 30% WP sold are cheap 520. The flahship phone are barely visible on the chart (see aduplex.com). Nokia build quality is BS, a $100 Lenovo android device outperform more expensive 520. Just give up Microklunk, we don't miss you in this mobile era.
      bksherly
      • Microsoft is in business to make money

        What is a microclock and microklunk? I don't understand those terms.

        Microsoft is a for profit company to make money so yes they are going to try to get the most money from their customers and eliminate competition. I don't know of a single for profit company that wouldn't do that. If didn't they won't be in business very long. Business knowledge is not your strong spot.
        Loverock.Davidson
        • There are lots of for-profit businesses

          Not all of them are ethical. Indeed, all criminal enterprises (and I don't think MS qualifies) are conducted on a for profit basis. But many of us expect better from organizations that don't enforce their business models with firearms.
          John L. Ries
      • You have proved yourself

        to be totally foolish person when you say that the build quality of Nokia phones is bad.. Honestly, have you lost your mind?
        Ronty1996