MicroNoke? KiaSoft?

What will the merger of 99,000 Microsoft employees with 32,000 Nokia phone division employees produce?

It’s hard to say for certain about technology, but without a doubt it will bring lay-offs.  I’d expect about one-third, that’s over 10,000, of the Nokia folks to be shown the door.

That much is pretty typical for mergers, which are usually part of the death spiral of decline for large operations.  Is there any chance that adding Nokia phones to Microsoft will change anything?

It can’t hurt.

Apple has shown that vertical integration is not only possible, but very lucrative in mobile technology.  Samsung too is highly vertically integrated, really only relying on Google for Android and Qualcomm for LTE modems in the United States.

Is Microsoft going down the vertical integration path?

Yes, but they don’t know it yet.

The laws of economies of scale and cost-cutting will require Microsoft to make more and more.  Google has an out by practically owning the cloud for mobile.  Microsoft doesn’t have that out, so Microsoft too must relentlessly cut costs.  Microsoft also has deep pockets and will be forced to subsidize their new mobile products division for some time to come.  Times will not be pleasant in that division as cost-cutting will mean lay-offs and sizable ones, despite the transfusion of cash that will accompany this pain.

What does this mean for Windows Phone?

Despite the pain to employees, this merger does breathe some new life into Windows Phone and also the related Surface tablets.  Windows 8 just came out last year and Windows 8.1 is about to be released.  I’d expect a new version of Windows Phone OS every year also now.  So the pace is about to quicken and if Microsoft is to gain any traction in the market, they have to move faster.

Can this work?

Yes and no.  Yes Microsoft will gain in smartphone marketshare, but frankly at 3% they and Nokia, have nowhere to go but up.  I don’t doubt they’ll double what they have and reach 6% by year’s end, but can they contend for market leadership?  That’s where the trouble with this deal is.  Microsoft by its nature, moves incrementally and the smartphone market has been one leap after another.  Fortunately for Microsoft that pace of rapid innovation and change has plateaued, so Microsoft now has specifications fully realized and can target them.  The only area Microsoft is weak at is the cloud support mobile devices crave, but I’m sure those can be bought too.

The problem for Microsoft is the next market: wearables. Smartphones are sooo yesterday. Google Glass is the cool new thing, at least until the Apple iWatch comes out.  Microsoft can’t compete with that, they don’t do new well.

One of the consequences if wearables really do take off will be the increased importance of the cloud, because without significant cloud services, wearables would be little more than the Casio calculator watch, a kind of smart toy.  So that $7.1 billion for Nokia was just an ante to get into the poker game.  The real bets are still to come and will involve cloud services and probably even cloud infrastructure.  It’s not hard to imagine Microsoft gobbling up Rackspace soon.

I don’t expect smartphone hardware to improve much by any vendor, but I do expect Microsoft to improve their smartphone software and hopefully, but not for certain, also improve their wretched tablet software.  The new Microsoft mobile unit may start to copy Samsung’s strategy of many different form factors and sizes.

However all-in-all this was a deal that had to be done.  Nokia was unsustainable on its own and would have had to keep cutting until it could no longer play the smartphone game.  Microsoft did not have a horse in the race and needed something to leverage to get into the market.

So now the fun begins.  Maybe Microsoft can make a better smartphone.  Or at least one as good as the iPhone or Samsung Galaxy.  I applaud Microsoft for trying.

Leave a Reply



You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

© 2022 pdxmobile Suffusion WordPress theme by Sayontan Sinha