Does a Microsoft-Nokia mashup make sense, or are its supporters just nuts?

I disagree with TechFlash's Todd Bishop, who today writes that a "wholesale shift by Nokia to Windows Phone 7 from Symbian would be a huge change, similar in magnitude to, say, Apple adopting Intel chips." Oh, no, it would be much bigger than that and way riskier. [Editor's Note: Quote corrected for transposed "by" and "to"; I make that kind of mistake all the time.]

Bishop responds to yet another call for Nokia to enter an unholy operating system alliance with Microsoft or to merge -- this one from Berenberg Bank analyst Adnaan Ahmad. As the TechFlash managing editor rightly observes: "Ever since he went to Nokia, [Stephen] Elop's connection to Microsoft has been viewed as a possible prelude to a tighter relationship." Elop left Microsoft in September 2010, as president of the Business division, to become Nokia's chief executive. As I expressed nearly six months ago, Elop wouldn't be my first choice to run Nokia.

Perhaps other people are thinking the same thing, because a Microsoft-Nokia mashup dominates the commentary -- like that woud be the most valuable outcome of Elop's jumping ship. Frankly, unless Elop and Microsoft CEO Steve Ballmer had some increased partnership plan or merger in mind before the leadership change, a deal might be even less likely than before. Ballmer expects loyalty. Elop left the important Business division leadership with less than two weeks notice -- simply uncharacteristically short for an executive of high position. That bridge with Microsoft is burned, again, unless Ballmer and Elop already had an understanding.

A merger would only set back Nokia, at a time when it is facing increased competition from Android smartphones, iPhone and white box and branded feature and dumb phones coming out of China. Microsoft would buy market share that it likely couldn't keep. Nokia's Symbian has already ceded the market share lead in smartphone operating systems to Android. A switch from Symbian to Windows Phone would benefit Microsoft but prove to be disastrous for Nokia. Android share gains aside, the Finnish handset maker already has too much mobile OS fragmentation without taking on another wholesale.

Also, Nokia has too much invested in Symbian, particularly from its developer channel, that would likely be lost in an operating system transition. Today's loyal developers, particularly those thinking of switching major resources to Android or Apple's iOS, would have even fewer reasons not to jump platforms.

Then there are the cloud services. While I'm not really impressed with Ovi, Nokia has millions of subscribers who would be displaced in a move putting Windows Live alongside or ahead of existing cloud services. That said, surely Nokia's Windows-only Ovi Suite could be tweaked to sync with Windows Phone. Even so, in an OS switch, the last thing Nokia needs to do is create cloud services confusion or brand problems.

Long term, however, there are benefits to both companies -- more from a merger. Cloud-connected devices are the future of computing. A report today from All Things Digital claims that in just three weeks Intuit has had 350,000 downloads of its tax-filing app. That's a huge metaphor for the smartphone's future utility -- people filing tax returns. Merging with Nokia would likely cost customers and developers in the short term, but give Microsoft a mobile platform to build for the future -- and that could include tablets and other mobile devices. Microsoft would gain manufacturing and distribution mechanisms and global relationships it doesn't now have and the ability to offer an end-to-end software, hardware and services platform to compete with Apple, HP and Research in Motion.

The problem about the future is the present. Android and iPhone are competitors that likely will reshape the mobile device industry even before Microsoft and Nokia could complete a merger. It's a tough call for Ballmer and his executive team to make. I wouldn't want to make it. Would you?

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