The real and sad reason Microsoft is acquiring Nokia’s devices unit

Upfront disclaimer – I have been a critic of Windows Phone and Nokia from the beginning, that hasn’t changed.

OK, so like the rest of you, I got the news that Microsoft would be acquiring Nokia’s devices unit.

As soon as I read that, I went back into the archives to see what had been written on this blog about Nokia and Microsoft and wow, it was actually fun reading.

Having a large blog is always fun because you have a record of all the stuff you said and how it all turned out differently. 🙂

In April of 2011, after Microsoft and Nokia cemented their partnership, I said the following:

Now my take on the deal..

I’m not sure that I see the value in the union. I understand from a strategy perspective why Microsoft had to do something but I’m not sure why Nokia would be the company that was chosen.

In the united States, Nokia is hardly the sexiest brand of smartphone even though they have tremendous smartphone coverage in Europe and Asia.

I’m just not certain that long term, this can be a successful union between these two companies. There is a lot to be worked out beyond signing the papers.

How do updates get rolled out? Who has the final say with deisgn decision? How are aesthetic conflicts resolved?

I’m just not sure how their final hybrid product will take on Apple and Google’s Android phones.

In June of 2011 – Nokia vehemently denied Microsoft would buy part of it’s business.

On January 12th of last year, I wrote:

Strategic takeaway from all that is, Microsoft has no plan B for Windows Phone. Nokia is it.

Sink or swim, Windows Phone is tied to the Nokia platform for the foreseeable future.

There was even more speculation about Microsoft buying Nokia in August of 2011, January of 2012 and April 2012 

OK, fun over.

There has been a long and strategic history with these two companies but I’ll cut through the bull and tell you why i believe this is happening and this is a mistake.

I think that the market has spoken about the Metro/Tile based interface and it’s not a success. It wasn’t a success with Windows 8 and it hasn’t been a success with Windows Phone 8.

Some might point out the fact that Windows 8 has an estimated 110 million + users but that to me isn’t relevant. It’s a lot of users but:

  1. It has been a long tortured road to get here;
  2. The number would have been a lot higher without the bad press;
  3. Adjusted, the rate of sales is still lower than the sales of Windows 7;
  4. There are a bunch of people who are just locked in for the next Microsoft product due to the scale of their market – it is what it is;

Globally though, I believe that the Metro tiles simply have not caught on. There are so many products on the market dedicated to bypassing the Start Screen (19 so far on Wikipedia ) and Windows 8.1 had to include that option because it’s that unpopular.

I believe that bleeds into Windows Phone.

IDC stats

IDC stats

According to IDC, Windows Phone has 3.9 percent of the market right now compared to IOS at 16.9% and Android at 75.3%. Now IDC also predict that Microsoft will grow to 10.2% in 4 years but they’re full of crap – it’s a guess.

This is the same company that predicted 11.6% market share for Windows Phone in 2016 –  and predicting Windows Phone would do 20% market share in 2015 .

Whatever.

Here’s what we do know.

Whatever Microsoft and Nokia are doing, it ain’t working. People just aren’t flocking to the tiles in droves. Since the definition of insanity is doing the same thing over and over again and expecting a different result, here are the two options Microsoft will face with the Nokia acquisition.

  1. Double down and keep doing the same thing faster and more efficiently = fail
  2. Change Windows Phone’s interface

Unfortunately, I believe that Microsoft will do number one because number 2 would be too difficult to do.

I think Microsoft have internally decided that third place behind Android and Apple is OK. I think the company sees profitability even as number 3 (ahead of RIM).

I believe that Microsoft have given up on building an iPhone or Android killer. At this point, I believe all they want to do is complete their Windows 8 ecosystem and hopefully at some point be able to provide real value with the entire ecosystem.

I believe that so much time, energy and marketing has gone into moving to Windows 8 and Windows 8.1, the company simply cannot contemplate making any significant changes to the direction of these products.

So what next?

My prediction is that Apple and Android will continue to power ahead and make phones people want to buy. Microsoft will (for the reasons stated above) power ahead and make phones less people want to buy.

I also predict that this move will alienate phone makers and make Android (even) more attractive. Windows Phones haven’t exactly been flying off the shelves and now these phone makers have to worry about the Lumias getting preferential treatment/funding/R&D etc ?

At some point, there might less or no incentive for them to stay and fight for that market.

Bottom Line

The acquisition of Nokia technically makes sense but can’t cure the underlying problems with Windows Phone. Microsoft and their new phone division will have to dig much deeper to understand why people don’t want to buy their phones. They will need to be honest about the User Interface and attempt to fix the problem.

That’s my take.. now over to you.

What do you think about Microsoft, Nokia and the acquisition? What do you think about my analysis – accurate or bullsh$t?

Use the comments below.

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