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Print 46 comment(s) - last by Mitch101.. on Sep 5 at 1:40 PM


  (Source: Bloomberg)
Let's examine two views on this controversial, provocative union

Microsoft Corp. (MSFT) late Monday announced its intention to purchase Nokia Oyj. (HEX:NOK1V) sending shockwaves through the OEM space.  Whether this is a match made in heaven or hell remains to be seen, but one thing's for sure -- these two companies were already closely tied so this relationship is not exactly new.

With that in mind, I'd like to present two schools of thought on the merger.

I. Windows Phone, the Winner

Key points:

Fiscal
Patents
Devices Let's assume for a minute that Nokia continues its current Windows Phone sales growth.  That seems reasonable given that its Q2 bump was before its most impressive Windows Phone to date -- the Lumia 1020 -- even landed.  With a Nokia-crafted "Surface Phone", sales could leap even faster.

Nokia Lumia 1020

The Surface and Nokia's Lumia devices mesh well together -- both share similar bright, colorful style cues and some common elements in terms of hardware.  A single branding -- either "Surface" or "Lumia" -- could reduce confusion and sell consumers on an ecosystem/look similar to Apple's iOS products.

Currently the only OEMs growing faster than Nokia are Lenovo Group, Ltd. (HKG:0992), Samsung Electronics Comp., Ltd. (KSC:005930), and LG Electronics, Inc. (KSC:066570).  Samsung is predicting a Q3 sales slump, so Nokia could soon find itself in the top three in market growth.

Google Inc. (GOOG) and its subsidiary Motorola have shown that a platform provider can use a hardware-making subsidiary to lead by example and encourage other OEMs to step up their game.  Likewise Nokia, if properly managed could actually encourage other prospective Windows Phone makers like Acer Inc. (TPE:2357) to push out high-end Windows Phones.

Windows Phone marketplace
Windows Phone is the fastest growing mobile platform. [Image Source: WinSource]

In a way the Nokia-Microsoft union is superior to the Motorola-Google union as Nokia has already independently undergone its own restructuring, so Microsoft won't have to alter the unit as drastically as Google had to with Motorola.

Finally, Stephen Elop could play a key role in Microsoft's leadership team.  The former Microsoft Canada executive has had his share of ups an downs as Nokia's chief, but he has ultimately revamped his company into a leaner, growing competitor.  That kind of reimagination seems like it could be a boon to Microsoft amidst its "devices and services" push.  With CEO Steve Ballmer departing, Mr. Elop provides the kind of veteran leadership Microsoft is short on.

II. Losers Flock Together

Key points:

OS
  • Microsoft's desktop companion to Windows Phone, Windows 8, has missed badly
  • Both companies have suffered recent declines in sales, relevance

Devices
  • Nokia has been slow to deliver on devices -- a major reason why Windows Phone failed to take off early
  • OEMs could run from the Windows Phone platform at the first hint of Nokia brand favoritism
  • What ifs -- Nokia could have done better sticking with Symbian or switching to being a premium Android OEM
A second perspective would be to look at this merger as a union of two failing firms.  While Nokia's Windows Phone sales are "growing", they still remain less than half of the Symbian smartphones it sold in 2011.  Likewise Microsoft is suffering the worst percentage drop in PC sales in history.

Ballmer fed up
Nokia and Microsoft have both struggled, seeing a net decline in sales from their peek levels.

The problem with Nokia, image-wise, from an investor's perspective is that it will never be able to lay to rest the "what ifs".  While 2011-era Symbian was losing sales and looked dated, if Nokia had opted to aggressively overall its own platform -- or opted to jump to a mature Android en masse, there's no telling how its sales might be different today.  BlackBerry Ltd. (TSE:BB) has certainly presented a cautionary tale regarding first party OS development by smaller firms, but perhaps Nokia could have found a way to deliver better with Symbian.

The Motorola-Google tieup, viewed in a different light, could offer some concerns for Microsoft-Nokia.  In the wake of its pairing with Motorola Mobility, Google has seen slow sales.  

Nokia Elop
Nokia might have suffered less of a fall, had it gone with Android.

Combine that with OEMs' vocal fears about Microsoft's Surface, and you could see Nokia's recovery slowing, while competitor OEMs to Nokia are driven away from the Windows Phone ship.


Comments     Threshold


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By Mitch101 on 9/3/2013 10:16:51 PM , Rating: 3
Well said and I think OEM's are close to death anyhow they just dont know it yet and it doesnt matter if they went Windows or Android. Windows Phone was never thier cash cow and Google owns Motorola which is the same thing as Microsoft owning Nokia. Even in Android world I think Samsung is the only one making money so Android isnt even a cash cow for HTC or Huawei its just life support until Google pulls the plug and decides it wants to make money with Motorola only.

The question is should Samsung worry about this? Samsungs strong point is they manufacture a lot of high end parts used in todays phones and thier own so they in a way control the smaller smartphone makers for now. Look how Samsung caused problems for Apple, Nokia, and HTC its no wonder that Samsung rose to the top especially for Android and was able to take Apple down a few notches. Samsung could have done the same for Windows Phone Instead Samsung kind of forced the hand of Microsoft to purchase Nokia so Microsoft can continue Nokia's return to growth. Obivously this solves all of Nokia's cash issues and it also allows Microsoft to focus on Nokia specifically just like they focus and optimize and X-Box and exactly like Apple can focus all its efforts on iPhone. This is the right choice for Microsoft. Nokia is almost firing on all cylinders again and Microsoft is able to grab them at the right time.

Nokia just became a monster and Stephen Elop is much better than Ballmer so watch out all he needs is the cash and now he has it.
Stephen Elop as head of Microsoft will be huge.

This also might explain why Samsung is looking at making its own OS - Tizen.
Samsung co-CEO pushes Tizen OS as more than a simple alternative for Android

All I can say is grab a bucket of popcorn because this just got real on so many levels. Dont be surprised if Intel plays a major role very soon in all of this as Im sure Intel has a few cards to play and do something about Samsung and ARM.


By poi2 on 9/3/2013 11:00:41 PM , Rating: 3
My bet is on Intel, AMD is onboard Nokia devices
at least that way more fun


By w8gaming on 9/4/2013 12:09:42 AM , Rating: 3
Well, Microsoft starts to get real serious on the hardware end. But they have to work on the software end as well and find ways to improve their Windows Store. Despite what many Microsoft supporters think, Windows Store is still way far behind iOS and Android. To prove it, just do this using Bing, search for "best video player in Google Play" vs "best video player in Windows Store". While Android market search results shows several good candidates, there is hardly any useful result from the Windows Store. And the built-in video player in Windows 8 is utter junk which lack support for several popular formats. If Microsoft cannot end up deliver the basic functionality for today's mobile usage, they will not be making much progress even if they have solid hardware.


By JPForums on 9/4/2013 1:17:04 PM , Rating: 3
quote:
Windows Store is still way far behind iOS and Android. To prove it, just do this using Bing, search for "best video player in Google Play" vs "best video player in Windows Store". While Android market search results shows several good candidates, there is hardly any useful result from the Windows Store. And the built-in video player in Windows 8 is utter junk which lack support for several popular formats.
It is Windows 8. You could, you know, just use the media players that have been there for ages. You've got WinAmp, Media Player Classic, VLC Player, and even iTunes just to name a few. Kind of a nice thing about Windows 8 is the fact that the existing library of software is massively larger, more relevant, and higher quality than the selection available in any app store. It never ceases to amaze me how many people think Windows 8 is behind because their app store is small when the software selection is so huge and much more fully featured than what you find in an app store. Who came up with the idea that software doesn't count if it isn't sold in an app store anyways?

Now, the app selection does present a major problem for Windows RT and to a lesser extent Windows Phone. Microsoft in general presents Windows RT as a function(productivity) oriented tablet OS. So it is a bit alarming that such a function oriented tablet has such a small selection of applications in windows store when the windows store represents the bulk of software available to it. It is less of a concern with phones as they don't lend themselves particularly well to more productive use. While Windows Phone is still notably behind, many of the big hitters are available so they work well for most use cases.


By Mint on 9/4/2013 6:08:57 AM , Rating: 2
Google is already squeezing OEMs with their Nexus tablets showing up everyone on features and price. Asus and Samsung are getting low margin business from Google to make them, but everyone else is dying in the tablet space.

I wouldn't be surprised to see Google try to do the same with Motorola and smartphones, though I don't think OEMs will concede as easily on that front.

It'll be interesting to see what Samsung does, but in all honesty Google needs them. I think Tizen is nothing more than a contingency plan in case that changes.


By Da W on 9/4/2013 6:20:12 AM , Rating: 1
Forget Elop as CEO. What will he do? Sell bng to Google? Sell Windows to redhat?


By Mitch101 on 9/4/2013 3:17:49 PM , Rating: 2
Ballmer tried to sell Bing to Facebook. Facebook would have done well with it.


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