Friday, 18 March 2011

Microsoft, Nokia Deal Poses Big Questions

I'm a fan of John le Carr� novels and other pop-culture spycraft, so when Nokia CEO Stephen Elop announced Feb. 11 that his company would enter into a wide-ranging agreement with Microsoft--one that would see Windows Phone 7 ported onto its devices--I immediately thought: sleeper agent.

Remember that, until recently, Elop was president of Microsoft's Business Division. Then he leaves to take the reins at Nokia. A few short months later, he announces that Nokia will essentially become a Microsoft subsidiary, at least in terms of mobile software. Of course, it's not like he and Microsoft CEO Steve Ballmer planned all this from the beginning--but wouldn't it be interesting if they did? Maybe Elop has other movie-spy skills, like the ability to build a bomb out of common household materials or kill a man with his pinkie. Both those might come in useful with the Nokia employees who are apparently less than enthusiastic about this whole deal.

Some intrepid reporter at this week's Mobile World Congress in Barcelona asked Elop if he was a "Trojan horse," penetrating Nokia in order to execute Microsoft's plan.

"The obvious answer is 'no,'" Elop apparently replied, according to an Associated Press article. "Thanks for asking."

Oh, that's no fun. But for both companies, the benefits of such an agreement seem pretty obvious. "The two companies are on their respective back feet," Andrew Brust, founder of Microsoft analysis and strategy provider Blue Badge Insights told my eWEEK colleague Darryl Taft. "But they can certainly help each other: Microsoft gets global reach and market share from Nokia; Nokia upgrades from the somewhat stunted Symbian OS to something modern, touch-centric and contemporary in design value, through Microsoft's WP7."

Other analysts don't seem quite so sold on the deal.

"We think Nokia have created a new set of issues--a lack of ecosystem control, margin decline and a raft of new royalty payouts--in return for a 'unique relationship,'" Lee Simpson and Andrej Krneta, analysts with Jeffries & Co., wrote in a Feb. 14 research note. "With WP7 as Nokia's new primary smartphone OS, why would any operator take an end-of-life product (Symbian). This can only cap the top-line for Nokia going through 2011 and much of 2012."

The analysts believe that Nokia's first Windows Phone 7 devices will be "hollowed out 'N8s' or the like," referring to one of the manufacturer's higher-end smartphones. "Despite longer-term assertions of speedy time to market designs, the overhauling of roadmaps (and cancellations near-term) will likely dent near-term progress and leaving Nokia dangerously exposed to further market-share erosion."

The other question is whether Nokia can convince its third-party developers to make an abrupt about-face and start developing for the Windows Phone 7 platform. I'd be interested in hearing whether those developers are open to the switch, or if they're irritated enough to head into the open arms of iOS and Android. Over the past few months, Microsoft has been aggressive about promoting the virtues of Windows Phone 7 to the developer community, and I wouldn't be surprised if its executives use the Nokia deal to further push the virtues of their platform and apps.

Meanwhile, Nokia apparently confirmed Feb. 13 that leaked concept images of a Windows Phone 7 device, floating around on sites such as Winrumors, are in fact genuine. If those designs hold true to a finished product, Nokia's WP7 offerings will be sleek and thin, in a way that seems calibrated as a direct response to the iPhone and Motorola's Droid franchise.

But many details of the new alliance remain unclear. "We have a formidable plan to ensure our collective leadership in the smartphone market and in the ecosystem that surrounds it," Nokia CEO Stephen Elop told a London press conference Feb. 11. "Our long-term strategic alliance will build a global ecosystem that creates opportunities beyond anything that currently exists."

He could tell you more about that strategy, but then he'd have to kill you.



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