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Nokia-Microsoft: Will they succeed or continue to limp along in smartphones?

Nokia-Microsoft: Will they succeed or continue to limp along in smartphones? | Feb. 11, 2011
Early success seems elusive for both, analysts say

Will Stofega, an analyst at IDC, attended the London partnership announcement where Microsoft CEO Steve Ballmer and Nokia CEO Stephen Elop spoke, saying he was impressed by Elop, a former Microsoft executive, and his rationale for moving to Windows Phone.

Given the need for Microsoft to put WP7 and its future generations of mobile OSes in more devices and Nokia's fall-off in smartphone market share, "they both had to do something," Stofega said in a telephone interview. "Elop made a logical, well-thought-out decision. He laid out the case for why they did this and where they're going, and he certainly has the Microsoft experience to get things moving."

Elop's general argument for partnering was that when Nokia considered whether it could find an OS internally that would do well in the market, "the answer was no," Stofega said.

Why not use the Android OS instead of Windows Phone, as many argued? "The argument against Nokia going with Android was that Nokia already had great assets to leverage against Google," Stofega said. One example is Nokia's NavTeq navigation software, which would go up against Google's own Maps Navigation software, Stofega said, meaning that Nokia's investment in NavTeq would probably lose.

"For both companies, it's pretty important that the partnership succeeds," Stofega said. Long term, the partnership "has a very good chance of succeeding, given the capabilities of the two companies. What has held Nokia back was a good OS and an investment in an OS. Windows Phone could be a pretty good investment and give them wind in their sails. Short term, there's a question of what happens," he added.

But Stofega sounded like a optimist compared with other analysts who follow the smartphone market. Said Carolina Milanesi at Gartner: "I think [Nokia and Microsoft] have a better chance together than alone, but their main issue will remain brand perception in the eyes of the consumer in the high end of the market. Nokia didn't really have a choice [other than to pick Windows Phone], as Android would have been a much harder play for them."

She explained that with Microsoft, Nokia can become the "preferred partner" for Windows Phone OS, or possibly the only partner. "With Android, that would not have been the case," Milanesi said, noting that manufacturers such as Samsung, HTC and LG "can walk away from Microsoft, but they cannot walk away from Android."

In the near term, Microsoft stands to gain more from the partnership than Nokia, since the software maker finished with 3.4% of smartphone sales to customers in the fourth quarter of 2010, ranking fifth, Gartner said. In contrast, Gartner said Nokia's Symbian OS had 32.6% of the smartphone market in the fourth quarter, down from 50% four years earlier when the iPhone and Android phones were emerging.


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