The instinct we had in the first five seconds of hearing that Nokia had opted for Windows Phone 7 as its smart phone operating system was that it was now consigned to the dustbin of history. We have revised that opinion somewhat, but not too far.
There is little thanks and not much margin for any handset maker which supplies the world with phones to talk through, which do little else. Ask Motorola, which tried to supply cheap phones to emerging economics at margins which broke its back, before it gave into Android and was recast as a hardware ‘mostly’ handset company on the back of the rescue, enacted by Sanjay Jha. That rescue took two years, created a period of non-belief in the business, and there are still many non-believers in the future of Motorola, due mostly to the fact that it is now faced with problems differentiating itself from the likes of HTC and Samsung. Nokia is faced with a similar two years it seems, but perhaps made worse because it is the global leader in handsets.
Why is it that companies like HTC and Samsung can use operating systems like Android with impunity, do some level of UI innovation and they have no problems gaining credibility and market share, and a company like Nokia can’t pull the same trick? Why can’t Nokia use Android, WP7, MeeGo, WebOS and Symbian?
Well first off, Nokia has spent three years with its head in the sand, ignoring the touch paradigm and specifically ignoring the need to update its UI to work with capacitive screens, which need finger sized icons, instead of resistive screens that need a stylus anyway, and so can use tiny icons.
What Nokia has had is a sort of ’embrace’ touch without embracing it, approach. And that’s the approach of a market leader who doesn’t think it has to change. And that’s the problem right there, and don’t forget, even after the shift to WP7 the issues that beset Nokia are STILL there, and still have to be fixed. Shifting to Windows Phone 7 will not fix them in its own right, but it will allow Stephen Elop, the new Nokia CEO, the chance to bring in a completely different set of people to fix the problem, Microsoft style people, mostly Americans, who can think the Microsoft way, not that it’s a good way, but at least it’s not a Nokia way.
But by accepting WP7 Nokia has at least three or four continuing problems. The first is that it looks like it has joined the ranks of the handset companies which cannot build a software business, and which cannot build a cloud service strategy.
Ovi is a good portal in principle ‘ it offers as much music as Apple, almost as many games, some video and lots of Apps or widgets as Nokia calls them. It’s not as successful as Apple’s strategy for a number of reasons, and these reasons have to be fixed. First off Ovi is difficult. It’s difficult for users to actually work with, because of the lack of touch, the way things are not straightforward, the way when things go wrong, it tells the user nothing. But it’s also difficult for the developer. Nokia has companies as technical and as mighty as EA Games throwing up their hands a few years back at what it took to get Nokia to accept a game onto its N-Gage platform. Partly arrogance, partly lack of experience and partly Finnish stubbornness, that it knew best.
So the Nokia deal with Microsoft goes further, a lot further than a simple OS deal. Microsoft has to inure Nokia against itself, its poor onboard menu system, it’s poor portal layout with a lack of intuition, and against its over arrogant partnering rules.
The new WP7 can achieve this. It is a genuinely innovative interface, it’s fast and responsive, it will be on new multi-core chip hardware ‘ and Nokia’s N95 menu system, which almost lives on through all its smartphone version, will finally be replaced by something modern with touch at its heart.
The two are joined at the hip on DRM already, which is good and it’s bad. First it finally has a system that works, in PlayReady, and it works in Domains, such as families of devices in one household. But for things like Music it will mean that those devices can just as easily be Microsoft Zune’s as they can be Nokia handsets, but what they really BOTH need to do is throw away music DRM and given the effort it took to get Playready to work , they’re not going to do that.
The most worrying thing though is not the technical hurdles that both Nokia and Windows now have, but the fact that both companies are behind both Apple and Google in terms of customer and consumer sentiment and it’s hard to see how either company can change that.
Over the past few years many customers have sworn off Nokia devices for good, but those few remaining loyal customers could potentially now ditch Nokia, not because they dislike Nokia, but because they hate Windows on a phone. In fact that’s one of the big problems that Microsoft has for WP7, that despite it being a decent touch oriented OS for a portable device, what came before in the old Windows Mobile, was so bad, that people with long memories will continue to avoid anything bearing the same name.
Elop himself may end up reviled throughout the company (Nokia) and the country (Finland) and when the history of the cellular industry is written, it could easily name this decision as those which broke Nokia. But then again, what else could he do ‘ he was just being honest enough to see the calamity that was in front of him. Shareholders are said to be in revolt, but not enough of them to call for Elop’s head or make him consider other options.
What were the Nokia options? – To continue with Symbian, an OS that had taken too long to update to the needs of a web based, touch oriented, mobile community, and which had yet to embrace the fundamentals of touch screens, three years after it was obvious that their time had come. That decision would have been madness. A new CEO will have felt the internal love of Symbian, but also the slow pace of change within Nokia and felt unable to shift that into a higher gear, so the only way forward was to shift emphasis away from it. The options were to stick with Symbian, go for MeeGo, jump on the Android bandwagon, make this move to WP7 or embrace all of them, which might have just caused confusion.
MeeGo internally already have must have been shunned by Nokia. There’s nothing worse than an operating system that wasn’t invented here, unless it’s one which was invented here, but by a different group of people. Why were there so few devices launched which actually ran it, and why were so few new ones planned?
If Nokia had moved earlier to Android it might have called some of the shots, but now Android doesn’t need Nokia, and clearly the terms were not right to proud Nokia. There is also a lot to be said for operators advising Nokia that it should not go the Android route, which has been widely reported in the press. This might be something good for operators, but it doesn’t mean that it’s good for Nokia.
Nokia could, in fact, have chosen Android and made it work just as easily as WP7, but operators would have been faced with a single operating system for future smart phones. You might nudge me and ask what about Apple’s iOS, but the truth is that only one company is allowed to make devices with that OS.
Had Nokia gone for Android, that would have ended the handset and tablet OS wars before they began. Even Apple could not have stood up against the combined might of Google, it’s current crop of handset partners, plus Nokia. This would have moved to give Google the type of power that Microsoft had in its heyday on PCs, and it would have been able to begin calling shots to operators and perhaps to Nokia. But not going that route has meant that there is a still a three horse race, Nokia and WP7, Android and Apple. How long do we think that the alliance between Nokia and Microsoft might last? Well that does depend. But if it takes almost two years to transition to the new OS, it won’t be able to dent Google’s handset dominance, and new devices need to come out soon.
MeeGo itself may live on, but we can’t see any other company but Nokia making handsets based on it, and it may well end up as the ‘de facto’ operating system for set tops a few Tablets and little else.
So what’s the future for Nokia? Well that depends on how the company behaves going forwards. Ovi needs to be up and running and it needs to be made obvious to consumers that it exists and is easier to use. To do that all the Ovi cloud services (and they are considerable) now must be rapidly be recast on Windows Phone 7? It took Nokia over a year to get first Maemo and then MeeGo to support Ovi on its N900 phone, and even now many MeeGo phones still don’t use it. If Ovi itself needs re-writing, it could end the deal before it begins.
Nokia only has an edge over Samsung, HTC and Motorola, if it has an App Store, a Music Store, a Video Store and a Game store, and they are obvious and available on every device. And if that’s not true by the time it has its first WP7 phone out, then the whole deal is pointless. The younger handset buyer today wants Apps more than anything, and for apps read a different silly game on their phones every week.
But another serious question that Nokia needs to answer is when can it get into the Tablet market? If the answer is that it can’t make the move in 2011, then it will have been the first company to launch portable Tablets, as it did back in 2005 with the Nokia Internet 770 Tablet, and it will also become the last company to join the modern touch, App Store based tablet battle. We don’t think that Nokia would accept a decision that will put it last in that race and there are two obvious ways around it. First it can make a tablet around MeeGo, pretty much as it planned all along and the fact that Elop has conceded that there will be one more product running MeeGo launched by Nokia this year could mean that this is a holding product for 2011, while Nokia waits to enter the Tablet race proper in 2012. On the other hand that MeeGo product might be an interim bolster for its smart phone business.
The other way around this problem is for Microsoft after all to allow WP7 or some variant of it, to be used with Tablets and to give Nokia the opportunity to offer it first.
While the $64 billion question for Nokia to some, is whether or not this move will allow it to gain some market share in the US, the bigger picture is whether or not existing Nokia and Symbian products have enough price advantage to hold other smart phones (particularly from Android) at bay in its emerging territories. They will probably get eroded between now and the first fruits of this union, but not dramatically so, at least not at any faster rate that was already happening.
So the 2011 question is not so much whether or not WP7 will get Nokia into the US, but whether or not it can keep its market share in China and India using its existing designs, for at least 8 or 9 months.
Elop says that Nokia will have WP7 devices out during 2011, but there’s a big difference between September 1st and December 15th in terms of sales of those products, so it will depend which precise date, at what price, with what operators behind it, and whether or not Ovi will be fully functioning (and renamed as it will merge with other Microsoft portals and services), so Ovi features will have to come together along with Nokia Maps with Microsoft assets like Bing and AdCenter and the Microsoft Marketplace.
One of the big issues for Nokia and its MeeGo OS, was control of developers, Many smaller European developers are devotees of the QT development environment, (pronounced Cute). This is a developer base loyal to Nokia, but since it has always been a tool which can output to either Linux (and great fuss was made when Nokia mistakenly failed to include it in MeeGo plans, which it fixed) or to Windows, it should be no great issue for the QT team to have WP7 as an output in time for new devices. The alternative is relying on existing Windows developers to create Apps for WP7, and there’s no telling that they have the appetite for portable experiences, although from Nokia’s statement that appears to be the plan.
A statement from Nokia said that the major elements of its new strategy includes a broad strategic partnership with Microsoft to build a new global mobile ecosystem targeting the connection of the next 1 billion to the Internet in developing growth markets and working entirely in next-generation disruptive technologies ‘ with new leaders.
Part of that strategy still rests with Symbian and Nokia expects to sell 150 million more Symbian devices in the years to come, to go with the 200 million that have already shipped.
As of April 1, Nokia will have a new company structure, with two business units; Smart Devices, which will make the WP7 phones, led by Jo Harlow, who ran US marketing of Nokia devices and Mobile Phones which will include all Symbian Smartphones, all MeeGo Computers and strategic business operations and the Mobile Phones unit, which will be led by Mary McDowell, another US born Nokia official who will push into emerging markets.
Nokia only told its MeeGo partner Intel about the decision last Thursday. Since the Nokia announcement both Samsung and Sony Ericsson have launched new Android devices, underscoring what an incredible grip Google would have had on the smart phone infrastructure if Nokia had also gone with Android.