Nokia and Microsoft Join Forces in Smartphone Race

Feb 22, 2011 — Allan Pulga

At a London press conference (Feb. 11) and at the Mobile World Congress in Barcelona last week (Feb. 14), Microsoft CEO Steve Ballmer and Nokia CEO Stephen Elop announced plans to work together to challenge Apple and Google for top spot in the red-hot global smartphone market.

“(Ballmer and Elop) announced that Nokia would make Windows Phone 7 its main phone platform, a move that effectively confirms Nokia’s own platforms, Symbian and MeeGo, are uncompetitive and will be tossed onto the technology scrap heap,” wrote Eric Reguly of the Globe and Mail (Feb. 11).

Elop declared the smartphone market as having become “a three-horse race,” as the Nokia-Microsoft goes up against Apple and Google. Investors (Nokia’s shares dropped 9 percent on Feb. 11) and analysts are unconvinced the venture will succeed.

“Some technology analysts quipped that the Nokia-Microsoft marriage was like the marriage of two dinosaurs,” wrote Reguly. “One Google executive tweeted that ‘two turkeys does not make an eagle.’”

In Barcelona, Ballmer said his company is planning to launch a “significant volume of Nokia Windows phones” in 2012, but did not give more specific details, reported Georgina Prodhan of Reuters (Feb. 14).

Nokia, once the world’s most profitable handset manufacturer, has struggled in recent years to keep up in the rapidly growing smartphone segment, both in terms of hardware, OS and mobile apps (see Nokia’s Woes). Meanwhile, Microsoft has yet to make a significant impact in the U.S. smartphone market – according to The NPD Group, Windows Phone 7 held a mere 2 percent of the market in the fourth quarter of 2010 (behind Android at 53 percent, Apple at 19 percent, RIM at 19 percent, Windows Mobile Legacy at 4 percent; and tied with Palm at 2 percent).

“In the end, Nokia CEO Stephen Elop really didn’t have a choice,” wrote Tim Bajarin of SlashGear.com (Feb. 12). “When he surveyed the competitive landscape, he found that he was boxed in a corner. While Android might have looked attractive as an alternative for their fledgling smartphone business, to back it would make him just another Android licensee. And while he could have tapped into their software ecosystem, it would have been hard for him to differentiate at the hardware level and thus be thrust against the dozens of Android handset vendors chasing the growing smartphone market.”

Still, Bajarin acknowledges the two companies are powerful enough to “give them a fighting chance against iOS and Android.” The latter two companies have had a huge head start in both the marketplace and the developer community, he adds, but Nokia offers Microsoft the world. “This deal has much more to do about Microsoft expanding their mobile platforms around the world and leveraging Nokia’s worldwide position to do this.”

Peter Burrows of Bloomberg News argued (Feb. 16) that the smartphone OS market isn’t a three-horse race at all. “Barring big surprises, the other contenders (behind Apple and Google) – RIM, HP (with its recent acquisition of Palm) are in for a slog: too dependent on mobile devices to give up, yet lacking the tools to make much progress. All lost share in 2010 and have orders of magnitude few apps available for their devices.”

And these “contenders” aren’t only competing with Apple and Google, Burrows adds (quoting analyst Bill Whyman), they’re competing with the “whole ecosystem” – all the companies who have a vested interest in those platforms.

Topics: Wireless Trends, Mobile Industry

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