Sunday, 29 May 2016

Microsoft are a midwife at Nokia Rebirth

A peculiar press release appeared on Nokia’s website this week. It said that Nokia were re-joining the mobile phone device market again. However not with the Windowsphone platform but Android. You can read the detail here; Hello again

The wording is a little more careful saying the “Nokia brand” is returning. So what has happened at Microsoft?

In short two years ago Nokia had 97% of the Windowsphone sales but, despite making nice devices, it wasn’t making money. So it was slowly going bankrupt. This wasn’t new. When Stephen Elop, the former Microsoft executive, came to Nokia as CEO he cancelled the development of Nokia’s own smartphone OS called Symbian and went all in on Windows. His reasoning was that there was no distinctiveness in Android. This latter comment was also true because most Android phone makers are also not making much money.

As Nokia headed downhill if they suddenly went under then Microsoft would have almost no-one making Windowsphone. So CEO Steve Ballmer spent $7.2 billion to rescue Nokia’s phone business. Ballmer himself was on his way out and left what was left to the new CEO Satya Nadella. It is reported that Nadella was against the purchase but that’s what he got.

In fairness to Nokia Microsoft had never capitalised on the assets in the Nokia brand. Nokia had global feature phone business, recognition in many markets and in some areas such as Europe and South America sales were in double digits. Nokia had even pioneered putting NFC in phones for mobile payments. Only in the USA was the brand an unknown.

Microsoft didn’t do much. It produced a series of lacklustre low powered value smartphones for the developing world. It did little to progress Nokia’s brand and the lead Nokia had in mobile photography. So in July 2015 a new strategy was born. Three markets were going to get phones; enthusiasts (premium), business and value. These translated into the Lumia 950XL, 950, 650 and 550. They also wrote down the purchase of Nokia as and spent billions more on severance.

Microsoft were now depending on Windows 10 Mobile and the Universal Windows Program to help. The latter being apps that ran across all Windows 10 devices. The reality was that by October 2015 the OS was not ready and there were few apps. The main apps have always been there but the stop start ecosystem and chaotic Windows Store has never fired up developers.

At the beginning of 2016 Microsoft said no more Lumia phones for 2016. Two weeks ago they sold the feature phone business to Foxconn in China and last week they sold the remains of the mobile business, including the Nokia employees, to a company in Finland called HMD. HMD have the right to brand mobile devices “Nokia” and will be creating new Android based Nokia phones. In practice after buying Nokia mobile for $7.2 billion Microsoft have sold what was left for $350 million. They do keep some patents and technology but nothing else.

In the background there is a rumour that Microsoft may produce a “Surface” branded phone in 2017. Surface is their premium laptop/tablet product that up until now has been their reference design to encourage partners. They say that Windows 10 Mobile will continue and be available to partners for their devices and existing devices will be supported. They also say that Microsoft will focus on business phones and Continuum.

From the perspective of most consumers Microsoft is out of the mobile business. Microsoft “experiences” will be via apps on either IOS or Android devices.

My personal view is that I still have a Windowsphone. It was fast, responsive, the design was not based on endless grids of icons but on what made the phone a personal information tool. Unfortunately a number of self-inflicted damaging decisions and a world that made IOS and Android the only game in retail crippled Microsoft’s worthy effort.

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