Business

Can Microsoft salvage Nokia’s ‘burning’ platform

Nokia CEO Stephen Elop recently sends out a heart-felt memo to the company asking for radical changes.

February 14, 2011

Following declining market share and stock valuations, Nokia CEO Stephen Elop recently sent out a heart-felt memo to the company asking for radical changes. In his memo, Elop likened Nokia to a man standing on a burning platform forced to jump into icy waters and concluded that “a burning platform caused a radical change in his behaviour [...] We too, are standing on a burning platform, and we must decide how we are going to change our behaviour”.

The memo came a day before Nokia’s announcement of an alliance with Microsoft. Nokia now plans to use Microsoft’s mobile platform as the primary platform for its new smart phones, ultimately letting go of it’s Symbian and Meego platforms which have gained little traction in the smart phone market.

Nokia’s woes began when it became increasingly interested in becoming a competitor in the mobile Operating Systems market. However, Nokia is not a software company by any stretch and it does not have the “software DNA” exclusive to Google, Microsoft and Apple. Samsung and LG realised this and decided to go all out on the hardware, partnering with Android. Nokia continues to defend it’s Symbian platform and then again it’s Linux based MeeGo platforms with little success.

The news of Nokia’s partnership with Microsoft has received mixed reviews. It marks a critical juncture for both companies desperately needing to reinvent themselves to compete with Apple’s iPhone and Google’s Android based mobile phones. Investors sent Nokia’s shares plummeting on the news, reasoning that Nokia would have been better off partnering with Android which have proven its dominance. Nokia sympathisers argue that going with the Android platform is a long-term losing strategy because Nokia, LG and Samsung will all be offering the same product in a highly competitive market. The detractors are afraid that Nokia is betting all its hopes on Microsoft which has yet to prove its mobile platform.

Apple’s iPhone has been a runaway success story. Google entered the lucrative smart phone market with it’s Android platform less than two years ago and just this past week, overtook Apple’s iPhones in sales volumes. Microsoft on the other hand was unsuccessful with its Zune music player which hoped to compete with the iPod. It also failed to reinvigorate its mobile platform which failed to respond to the iPhone and Android platforms.

The climb is even harder for Nokia as CEO Elop notes in his memo, “Let’s not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally - taking share from us in emerging markets”. The low-end market offers razor-thin margins and with China’s presence in this market, margins will continue to decline.

“The game has changed from a battle of devices to a war of ecosystems,” Elop told reporters at a joint news conference with Microsoft CEO Steven Ballmer.

Nokia’s juncture also marks a major shift in the mobile phone market where power has now shifted away from hardware makers and into the hands of the software giants.

The writer is heading Online Strategy and Development at Express Media and can be contacted at aleem.bawany@express.com.pk

Published in The Express Tribune, February 14^th, 2011

COMMENTS (2)

Aleem Bawany | 13 years ago | Reply @abbas, that's a pretty good summation though I would add that Symbian will probably find itself on the lower end devices which seems reasonable. It's still a big market and rather than pull the plug, Nokia will continue to ride the Symbian wave for however long it can. Meego will be kept alive by a lifeline but it will also give the Meego team something to focus on and build upon. If the team can prove itself, it might be something, but most likely Meego won't be able to compete with Android, iPhone, BlackBerry or Windows Mobile. But all in all it seems like the they have jumped into icy waters. They didn't have too many options and they opted Microsoft over Android, possibly because everyone else opted for, and will compete in the Android market. It's likely that Microsoft gave Nokia a sweet deal--it would be a very Microsoft/Ballmer thing to do to acquire market share. The game will change for all mobile manufacturers, not just Nokia.

Abbas | 13 years ago | Reply for some reason, i had figured you'd be writing about this. it's unfortunate that nokia is headed this route. i'm sure being a european company, even internally the employees themselves must be torn apart. with meego, the cooperation with intel and amd had been moving along quite smoothly, but it seems like this ceo did not wish to share this vision. i'm guessing meego will be launched on one device, and that's really it, similar to how maemo5 got the n900. there's not much positive out of this for nokia it seems and ms seem's to have made a fairly lucrative deal here. currently, elop says that nokia will have the ability to mess with the OS but not fiddle around with the UI. if that's the case, they have a lot of catching up to do, since most of the nokia smartphones come with these features which wp7 phones do not. × no system-wide file manager × no Bluetooth file transfers × no USB mass storage mode × no Flash (nor Silverlight) support in the browser × too dependent on Zune software for file management and syncing × no video calls × new ringtones available only through Marketplace × music player lacks equalizer presets × no multitasking × no copy/paste × no DivX/XviD video support (automatic transcoding provided by Zune software) × Bing maps doesn’t have free Navigation (This is where Nokia ADDS value) × no internet tethering support × no handwriting recognition support seems like what MS gained is extreme global reach i.e entry into markets where Microsoft would have never even imagined, an excellent mapping solution, Hardware expertise, awesome supply chain, services like operator billing, and essentially they lost nothing. what nokia ended up gaining is relatively insignificant, ie, a decent touch screen OS that is supposed to be very competitive in user experience, a decent app marketplace which is relatively easier to develop for, and an entry into the US market and visibility in the US media. what they ended up losing is worse. 16% of stock price, Ovi and the whole Symbian community’s mind share, Intel’s confidence as a partner (Meego is pushed to a corner for experimentation in market disruption) , Qt’s cross platform technologies. Nokia have given the time frame for the first Windows phones to be 2012, in volumes. So, you may start seeing devices in late 2011. They still plan to ship 150 million Symbian devices, and launch 1 meego device as a part of experimentation. Do you see the idiocy? Roadmap says Nokia will develop devices for a dying platform, will develop only one device for a once exciting platform, while patiently waiting for the Windows phone to hopefully mature and then launch in late 2011 or early 2012.

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