The Nokia renaissance

A trusted source in the telecommunications industry tells me that Microsoft has been planning the acquisition of Nokia for over two years. According to my informant Redmond is waiting for the Finnish mobile phone provider to shed more of its market cap – currently sitting at around $22 billion – before tying things up.

I don’t believe it.

Firstly, Microsoft already has everything it needs from Nokia following the signing of an agreement between the two companies that opens various avenues of opportunity aside from Nokia licensing the Windows Phone operating system – which is the most significant part of the deal for Microsoft.

Secondly, Microsoft doesn’t do hardware unless it has to and can clearly differentiate – such as in the case of the Xbox and Kinect. It’s a software licensing company. You don’t make healthy margins from hardware unless your surname is Jobs. For everyone else it’s a tough volume game that I’m pretty sure Microsoft has no intention of playing.

But while we consider the marriage of these two technology giants, we were recently provided with a glimpse of what Nokia could’ve been sans Microsoft.

Windows Phone has been a failure to date. Its predecessor, Windows Mobile, had a pitiful market share in the smartphone arena, ending up with 5% last year according to Canalys. Since launching Windows Phone 7 Microsoft’s market share has actually deteriorated, falling to 3% in the first quarter of 2011.

Look at leading manufacturers’ operating system approaches and there is no question as to why Microsoft has fallen behind. Samsung and HTC are fully committed to Google’s Android operating system and their releases of Windows Phone devices have been little more than experimental. Microsoft is yet to win over handset vendors and it remains to be seen whether they ever will.

A source at one of the world’s largest handset manufacturers recently confirmed what I had suspected: nobody wanted the Windows Phone 7 device that their company launched in SA. Stock was returned by operators who could not dispose of it, while the company’s Android devices sold like hotcakes. The market has spoken.

Nokia will be the first manufacturer to go big on Windows Phone, but it remains to be seen if it can turn the tide for Microsoft.

And while Nokia prepares to enter the market with Microsoft onboard, the fruits of previous engagements are about to launch.

The Nokia N9 was announced in recent weeks running the MeeGo operating system that Nokia created in partnership with Intel. This was part of the strategy that the old Nokia regime put in place to regain relevance in the smartphone market. And it might have worked if their shareholders had given it a chance before displacing the CEO and alienating other key executives in the company like Anssi Vanjoki.

The N9 looks spectacular, although I haven’t had a chance to play with it yet. MeeGo seems to address all of the crippling issues that users had with the Symbian operating system. It also utilises the powerful services Nokia has built via its Ovi brands, such as Maps and Music Store. These services used to be differentiators for the company, but are now being tied into Windows Phone to the benefit of other manufacturers too.

Earlier this year I met with the new Nokia CEO, Stephen Elop, who explained that if Nokia was to be successful as a Windows Phone manufacturer it first had to work to improve and grow the Microsoft ecosystem. This makes perfect sense and I have faith in Elop’s strategy and ability to execute, even if I am skeptical of Microsoft’s mobile prospects.

But the N9 and MeeGo could’ve been the renaissance Nokia needed. The once fiercely contrarian Finnish company may well have clawed its way back to the top of the market without Microsoft.

Of course, now we’ll never know.

The N9 will soon have to compete with similar devices running Windows Phone, from the same manufacturer. Any success it does have will be weighed down by Nokia’s commitment to Microsoft. Marketing resources, etc. must be split. You won’t hear Intel’s take on this out in the open, but you can bet they’re fuming. The Nokia that Intel originally partnered with is no more, its attentions split and its strategy transformed – not necessarily a bad thing, depending on your perspective.

So while we wait to see whether or not Microsoft and Nokia can redefine themselves in a market obsessed with Apple and Google, let’s take a moment to consider what could’ve been.

Check out the promo video for the N9 below. I can’t wait to get my hands on it.

I'm a writer and broadcaster who also designs apps and strategies for disruptive startups in the financial world. Find out more on my about page.