Four or five years from now, when the book can be written on Nokia's
The risk of a Nokia-Microsoft alliance going nowhere fast and further accelerating Nokia's smartphone market share freefall are pretty significant. I think the move guarantees that 2011 will be a very rough year for the company. But once you weigh all of the pros and cons, there was probably no better choice for Nokia to make if it wants to bring back its glory days, rather than being just another "competitive" face in an increasingly crowded industry.
Why the status quo wasn't an option
By rushing into Microsoft's arms, Nokia effectively gives the kiss of death to its home-grown MeeGo operating system, while also placing its mainstay Symbian platform on life support. But considering the dire straits that its smartphone business now navigates -- IDC estimated that Nokia's smartphone unit share plummeted from 38.6% in Q4 2009 to 28% in Q4 2010, and its revenue share is doubtlessly much lower -- staying the course was really a non-starter. Android and Apple's
Meanwhile, MeeGo was bound to be incredibly late to the game, and no other major phone manufacturer has shown any interest in the platform. From the start, MeeGo had "niche status" written all over it.
Android's dual-edged sword
In that case, why didn't Nokia opt for the very popular Android instead? This is where the debate gets interesting. Over the short term, at least, Android was probably the best available option. If Samsung could emerge as a major Android player as quickly as it did last year, then Nokia, with its R&D and marketing muscle, could've probably done something similar over the next 12 to 18 months.
But over the long run? The odds of Nokia standing out from other big-name Android vendors would be pretty slim. Samsung, Motorola Mobility
What Microsoft brings to the table
At first glance, and probably second glance as well, Microsoft looks like a very improbable savior for a beleaguered wireless giant such as Nokia. The company's now-scuttled Windows Mobile platform ended up being blown out of the water by Apple and Research In Motion
- Windows Phone 7 Series is pretty innovative. I've spent a bit of time playing around with Windows Phone 7 devices, and I'm generally impressed with what Microsoft has accomplished. Far from creating a me-too clone of Android or Apple's iOS, Mister Softy managed to build something radically different. Features such as "hub" apps that span multiple screens, home-screen "tiles" that turn up relevant information, and deep integration with the company's Xbox Live, Zune, and Office platforms mean that Windows Phone should be perfectly capable of standing out from the crowd.
- Manufacturers are lining up. Four Android manufacturers -- Samsung, HTC, LG, and Dell -- have already released Windows Phone 7 devices, and more will probably join in this year. These manufacturers don't want to be completely dependent on Google for their smartphone livelihoods, and Microsoft can now present a viable alternative. From Nokia's standpoint, this level of support from competitors is nearly perfect -- strong enough to draw in developers and increase consumer interest, but not strong enough to keep Nokia from being the platform's clear No. 1 vendor.
- Nokia and Microsoft have a "special relationship." Nokia CEO Stephen Elop went to great lengths on Friday to point out that Nokia's deal with Microsoft grants his company the ability to both deeply customize the user experience on its Windows Phone devices and collaborate with Microsoft on the platform's development. Microsoft appears to be granting Nokia large financial considerations as well. The extent of these perks would never have met Google's approval; combined with Nokia's traditional strengths in hardware design, battery life, and low-cost manufacturing, the cozy partnership with Mr. Softy gives the company a real chance to differentiate its devices relative to other Windows Phone licensees and the broader smartphone market alike.
If everything goes as planned (a big "if," certainly), the future of Windows Phone might look less like that of Windows Mobile, and more like that of Xbox: a Microsoft platform that slowly managed to become a legit alternative to the solutions of rivals who already possessed huge customer and developer bases, thanks to a combination of innovation, huge financial resources, and sheer force of will.
Short-term pain = long-term gain?
The market gave a clear thumbs-down to Nokia's decision on Friday; Wall Street might have seen the move as good news for Microsoft and Qualcomm
But when the market is finally done is done extracting its pound of flesh, there could be a good buying opportunity for investors willing to take a gamble on a company that just made a big gamble of its own.
Fool contributor Eric Jhonsa has no position in any of the companies mentioned. Google and Microsoft are Motley Fool Inside Value selections. Google is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor recommendation. The Fool has written puts on Apple. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, Google, Microsoft, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.