Nokia marries Microsoft, commits to WP7

As widely expected, Nokia has announced a “broad strategic partnership” with Microsoft, betting that the low-flying Windows Phone 7 platform can halt its slide.

It makes sense in that Microsoft is a software company, and Nokia desperately needs help in software. Indeed, the software development process is so beyond clearly its own competencies that Elop had no choice but to seek outside.

The financials of the deal have not been revealed, but reportedly both Microsoft and Google offered “hundreds of millions of dollars worth of engineering assistance and marketing support.”

Nokia’s statement asserts:

With Windows Phone as its primary smartphone platform, Nokia would help drive the future of the platform by leveraging its expertise on hardware optimization, software customization, language support and scale.

But Microsoft’s smartphone market share fell by more than half last year to just 4.2%, according to Gartner. Windows Phone 7, released in October, may have enjoyed an early bump in sales, but it is still well below the radar for consumers and developers.

Elop and Ballmer offer brave words about creating scale and disrupting “other mobile ecosystems,” but without specifying how this will come about.

Presumably the deal means Symbian has finally been put out to pasture, although Nokia camouflages this in dense corporate-speak:

With Nokia's planned move to Windows Phone as its primary smartphone platform, Symbian becomes a franchise platform, leveraging previous investments to harvest additional value.

MeeGo, the planned Nokia-Intel platform which is way behind schedule, will now become “an open-source, mobile operating system project” with “increased emphasis on longer-term market exploration of next-generation devices.”  The first MeeGo product is likely to ship this year.

As well as the partnership with MS, Elop also unveiled a company restructure – the fifth in five years.

In any case, both moves, announced at the start of Nokia’s capital markets day, left investors underwhelmed. Nokia’s NYSE stock fell 95c, or just under 10%, in after-hours trade.

The age of the smartphone

Yesterday I mentioned the arrival of the sub-$100 Android smartphone as just one more headache for Nokia.

Taiwan and mainland Chinese design houses are offering turnkey chip and OS solutions to OEMs at $100 and less, promising to jump-start demand for Web-friendly Android-based devices in developing markets, where Nokia now sells most of its phones.

Now Apple’s getting in on the act. Bloomberg reports that a smaller, low-cost version of the iPhone is in production inside the Cupertino hit machine. Apple is aiming to get the device – which would sell for around $200 – to the market by the mid-year.

The Bloomberg story also confirms GigaOm’s scoop three months ago that Apple is planning its own universal SIM card that would enable consumers to enjoy access to multiple mobile operators via iTunes. That’s a huge development for the mobile industry – will post more on that later.

It just remains to be pointed out that the age of the mass market smartphone is here; consumers actually bought more smartphones than PCs in the last quarter of 2010.

We’ll hear a lot more about low-cost smartphones at the annual mobile industry confab in Barcelona next week.



Elop's shock treatment may be too late to save Nokia

Nokia. Where were we?

Oh yeah, its market share has fallen by a quarter in the last two years.

And its CEO, who’s reportedly planning to defenestrate much of the top executive suite and deploy Microsoft’s Windows Phone 7, has called on the shrinking giant to make a “radical change” in its behaviour.

Elop’s already-infamous “burning platform” email – clearly intended to be leaked - echoes pretty much what every analyst has been saying:

The first iPhone shipped in 2007, and we still don't have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.

Nokia is being squeezed from above and below. As FT's Richard Waters puts it:

Nokia also faces an attack on its hardware margins from Chinese suppliers selling to emerging markets. Unlike IBM two decades ago, however, it finds the high ground of software and services already occupied – in this case, by Apple and Google. And Nokia’s own attempts at services, with moves such as its $8bn acquisition of mapping company Navteq and its “Comes with music” phones, have largely failed.

Just today Digitimes reports that China-based handset vendors are prepping sub-$100 Android smartphones in the BRIC markets.

Laments Elop:

While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.

It’s the right message, but may be too late. Indeed, if Nokia truly thinks WP7 is the answer, the burning platform may be destined to sink.

Nokia future lies on yellow(ish) Bric road

2010 was a shocker for Nokia, and if it were expecting a better start to 2011 it must be disappointed.

The former master of the handset universe has conceded defeat with its free Ovi music service, pulling the plug in 27 of the 33 markets it served.

According to the FT, the weak take-up was a result of poor marketing, limited handset choice, DRM issues and the ambivalence of operators who also offered music service. In other words, just about everything.

Nokia has also cancelled the launch of its Symbian-powered X7 phone in the US, reportedly because it was unhappy with the level of subsidies from AT&T.

The telling stat: Nokia’s flagship N8 costs $469 in the US (down from its $549 launch price). Consumers buy an AT&T-subsidized iPhone for as little as $199.

So there’s no love for Nokia from US carriers, and there won’t be until it comes up with an OS that is as user- and developer-friendly as the iOS or Android.

For that reason, we will continue to see stories like this one, reporting that Nokia is considering Windows Phone 7.

The grain of hope for Nokia – in fact more than a grain – is in emerging markets. In Q3, 65% of device sales came from Asia, Latin America and the Middle East. Greater China is now its biggest market outside Europe.

No surprise that Ovi Music Unlimited will confine itself to China, India, Indonesia, Brazil, Turkey and South Africa. According to iResearch, the Ovi Store is China’s most popular download channel, just ahead of China Mobile’s Mmarket.

So Nokia's story is not all bad. It may be losing traction in Europe and North America, but it's making new ground in the high-growth BRICs. There are worse places to be.