Microsoft's Nokia plan: WHACK APPLE AND GOOGLE Microsoft has posted the presentation it's used to explain its decision to acquire Nokia's mobile phone business and it reveals the key reason for the acquisition: hitting back at Apple and Google. The presentation is available as a PDF or a slow HTML slideshow here and gets interesting at slide 15, depicted below. Slide 15 …
"Nokia is free to create another phone division under a different name (Microsoft licenced the Nokia name for 10 years)."
If Nokia has been paid €5 billion to lose Elop and fund the creation of their new Android division, this may turn out to be a good deal for everyone except MS, who will sink slowly with Elop at the helm.
They were already making $10 per device. They've now paid $7,200,000,000 to earn an extra $30 per device. MSFT will have to sell 2,400,000,000 phones to get their money back. At current Nokia sales rates of 30,000,000 units per year, it'll take MSFT 80 years just to break even - unless consumers change their minds about WinPho and go from their current state of 'not interested' to 'I love it'.
It will not happen, the carriers hate the idea of MS owning a big portion of the market because of Skype.
In the same way that the carriers forced the adoption of Java to keep Microsoft at bay in the late nineties early 2000's, the carriers will just boycott MS massively.
MS is seen as armed and extremely dangerous by the carriers.
It doesn't help that Ballmer an Elop said that Skype was coming whether the carriers liked it or not. You can guess what the answer from the carriers is going to be.
The carriers have certainly been a force to be reckoned with with regards to phone manufacturers and their chances of getting phones sold.
However, I don't think the carriers hold quite the same power as they used to. Sure subsidies still exist but increasing number of people are starting to buy their own phones and opting for SIM only tariffs. Some carriers are even starting to separate the tariff from the phone making it clearer that the old "free" or few tens of quid for phone tariffs really are very expensive hire purchases rather than subsidy.
Hence the power that carriers used to wield is rapidly diminishing.
When Microsoft achieved monopoly status in the Internet client market, it declared that the browser was then fully evolved and left us with the five-year gap between IE6 and IE7. When its years of work on smartphones didn't translate into sales it said that obviously consumers did not want smartphones. It essentially spent a decade pushing bad products and insisting that it was everyone else that had the problem. Besides being exceedingly late to market with the decent Windows Phone iterations, Microsoft has created for itself a very tough reputation to overcome.
When Nokia had the number-one smartphone OS it gave us extremely contextual user interfaces that only a computer scientist could love, labyrinthian APIs and barely functional tools, and expected developers to rally behind Series 60 because it omitted such frivolities as being able to display anything other than the system font. Dithering this way and that on where to go next, it was like they heard Apple had made waves and decided to copy them but accidentally copied Apple circa 1993. That's how Samsung, HTC, etc, stole the market from them.
Both companies have shown sufficient penitence since but it's probably too late. A complete merger is probably a smart move but only as a final roll of the dice.
If MS had a lick of sense (which they apparently don't) they will hand WP development over to the Finns. It might adversely affect the dozen or so HTC and Sammy WP handsets sold per annum, but Nokia have shown that they are able to innovate within the ecosystem more nimbly than MS have managed. They haven't a hope in overtaking iOS and Android, but they could establish a very sturdy third place.
@h4rm0ny: and *you* are suggesting leaving that project with the ten teams that have made it the success it is today.
For the entire life of Windows Phone and its predecessors, the parent OS has been an overwhelming success and monopoly. Despite that, WP (under these ten teams of yours) has failed to reach a double digit share. On my planet, we say that is proof that the current management aren't up to it.
Absolutely. Microsoft seem under the delusion that the reason Windows devices don't sell has something to do with the hardware, hence the development of the Surface brand and now this. They also seem to be under the delusion that in order to catch up with Apple and Google they should slow down development and release updates less often. Nokia would have been more than capable of taking over the Windows Phone development and integrating into their devices as well as Apple does.
MS have to change their attitude to their customers, instead of seeing them as purely a revenue source they need to understand that they are customers first and foremost with their own perceptions of what their needs are.
The MS philosophy has been and probably still is, that they are so powerful and the market leaders so they can dictate to the customer.
They still haven't fully realised how much Vista and 8 have hurt them, " Oh we'll issue a patch for that" seems to be the average response to any problem with their products no matter how big.
May well have been better off spending the money on a good PR/Corporate Identity Guru.
to paraphrase the slide Success in phones-> will help tablets-> will help PC's
Sorry MS but PC's are not relevant in a mobile world. The fact that tablets and phone's are not tied to a PC is what drove the market in the first place.
If MS continue to hold onto that mistaken notion and define everything against their PC OS monopoly, they will continue to fail in the mobile space
This buy out is super cheap. Its not about the phones its about Nokia's patents. If Apple can ask for $707m from Samsung. Imagine what Microsoft could do with 20 years of patents?
A litigious Microsoft could ask for money from EVERY mobile maker and be happy every time the Android or Apple market share went up.
As the Motorola acquisition showed, having patents is not the same thing as having a decent team of lawyers who can make money from them. Besides, I think all the big players are tired of these long running, money draining legal actions and have declared something of a ceasefire.
"Ok, how does it work out that Skype is worth $8.5billion but a company that makes things and has an investment in actual things is worth $7.2billion?"
Because intellectual property is far more highly valued than tools and fixed assets. Most physical assets are subject to depreciation - they wear out, and require relatively expensive maintenance and repair. And other than patented or registered designs (which are IP) almost all physical assets are easily replicated. So you could spend £20m on a new production plant, but other than any trade secrets and patents, there's nothing to stop anybody from setting up a plant making a similar product, be that a phone, or a bucket.
A good patent requires no maintenance or repairs, and a decent bit of code can last for donkey's years. You might suggest that Silverlight (for example) isn't such code and you'd be right, but I'd raise you the kernel of NT, which has been and remains the foundations of desktop Windows for two decades. Likewise, the cobweb infested Cobol that keeps so many banks in business was written donkey's years ago, and still works. MS Office hasn't really evolved much in the past decade, with the bulk of the functionality unchanged - sticking a disjointed new UI on the front of your OS or your applications is only window dressing, and the core IP remains what it was. Now Android is relatively stable, how much will the kernel really change? Likewise IoS.
Normally brand is another excuse for paying through the nose. But in this case the Nokia brand is a bit shabby and soiled by the reversals of strategy and the muted reception for WinPho, whereas Skype was seen (by MS) as new, exciting, sexy, and unsoiled.
Looking at the history, the odds are against MS. They don't have a name for good hardware, they have a very poor record of making a success of acquisitions, they've been very poor when trying to make money in new markets, and they've just made a biblical mess with the entirely foreseeable botch up over Windows 8. At the core of all these failures has been a corporate arrogance, a refusal to listen to customers, which probably comes from their near monopoly in business and office OS and productivity software. If they can sell WinPho/Nokia products in volume to gormless enterprise CIOs then maybe it will all work out, or if Nokia's goodwill in emerging markets is retained. I don't see this myself.
..... on the KB/Mouse statement. I thoroughly regret not buying a 5 pack of the Optical Intellimouse (v1.1 5 button) when they were still available. In my opinion the best wired mouse ever made.
When mine finally died I was gutted, the newer ones just didn't seem as good and I don't fancy a pre-yellowed one from ebay.
"Because intellectual property is far more highly valued than tools and fixed assets."
Sadly, yes. The idiots who make the rules have decided that merely describing an idea should entitle you to an umpty year global monopoly. Obviously if anyone were to propose the same rules about physical objects, they'd be quickly certified and re-housed where qualified medical staff could look after them, but in this new-fangled "virtual cloudy" world, there don't seem to be any clue-by-fours to whack the pollies over the head with.
So in response to the OP's serious question ... it's in *your* world, and you may begin weeping now.
From the slide:
Success in phones is important to success in tablets
Success in tablets will help PCs
So they bought half of Nokia in the hope that it'll suddenly make Surface less of a turkey, and that will then somehow make Windows 8 suddenly a consumer darling that everyone wants and we'll all wake up and go out and but laptops and desktops?
It sounds like they've bought an ant that's hoping to pick up an elephant, which in turn is trying to pick up a mountain. Phones are beginning to blur into tablets anyway, and the whole lot are killing off PCs for many applications, not helping them.
Scooby Doo, where are you, cos no-one's got a scooby in this crowd...
What the bet that any other oems that did support Windows phone suddenly have a fire sale of them then drop the platform completely.
the worst thing Microsoft can do now is to try and force the Windows branding more than they do already, they need them to be Nokia phones NOT Microsoft or windows phones.
For those of us without tinfoil hats, what reasonable theories are there to explain this? Is the WP strategy proving to be a major disaster, and what evidence is there to support this?
Or, for an alternative tinfoil hat theory, is the sale the conclusion of a brilliant strategy on Nokia's part to get a Bigger Fool to pay for a worthless feature phone business. After all, if Ballmer had planned all this upfront, it would be the only plan that actually worked, wouldn't it? Much more reasonable (ha ha) to assume Nokia was also able to fool him big time, next to everybody else in the computer business.
Ballmer has just announced he's leaving. The share price immediately went up. Clearly this has offended him. So he's bought half of Nokia, in order to give his successor a massive headache as soon as he joins the company... Trying to integrate 30,000 new staff from a totally different business culture should keep the bugger busy!
That way Ballmer's legacy is saved, and he can hope not to go down in history as Microsoft's worst CEO.
Alternatively MS are so pissed off with their hardware partners that they're going to turn themselves into Apple. Soon they'll buy a middling PC hardware company - or maybe just contract it all out, and they'll make PCs, laptops, tablets and phones. I guess Nokia can do the tablets, given that a tablet is just a bigger phone anyway. I'm sure they'll still license Windows, and they'll not bother with the corporate desktop and server markets, but having a consumer market from all-in-one home PCs, via tablets and XBoxes, to phones makes sense. However as they've got a corporate culture as innovation-stifling as Nokia at its worst, I can't see them managing to turn themselves into a nimble consumer brand.
Third option, the MS board have written a random policy generator. Possibly computerised, possibly with the use of post-it notes and a dart board. This, Metro and the purchase of Skype are the results.
Kurt Eichenwald reported in Vanity Fair a year ago that the practice* led employees at Microsoft to avoid working with top developers, not cooperate on projects, and remain focused on short-term achievements rather than long-term goals. (In a first-hand account published on Monday on Slate.com, a former employee called it “as toxic for innovation and integrity and morale as media reports made it out to be, and then some.”) The program was reportedly still around as of July–in a recent interview in the Seattle Times, Ballmer said there had only been “minor changes" to the system.
- from http://www.washingtonpost.com/blogs/on-leadership/wp/2013/08/27/with-steve-ballmers-departure-a-look-at-microsofts-flawed-system-of-performance-reviews/
If they want to compete, Microsoft will have to stop making their employees afraid to take risks, or collaborate with others.
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