As expected, Nokia announced today that Microsoft’s Windows Phone 7 software will power its future smartphones.This, Nokia’s new CEO Stephen Elop must think, will give Nokia’s investors, customers, and partners the feeling that Nokia is at least trying to dig itself out of its grave. (Unfortunately, investors are unimpressed so far — the stock is getting crushed.)
But Nokia is still doomed.
The problems for Nokia in the smartphone industry are that 1) Apple is beating it at the high end of the market, stealing the industry’s profits, and 2) Google’s free/”open” licensing scheme means that most of the rest of the industry is using Android to build a huge developer ecosystem.
Regarding Apple: Windows Phone 7 isn’t going to make Nokia better than Apple. It may make Nokia better than it is today, but there are few reasons for high-end buyers to choose Nokia-Windows devices over today’s iPhones — let alone whatever Apple will be shipping in a couple of years, which is how long it will take Nokia and Microsoft to get good at working together. And now Nokia isn’t even in control of its own destiny. Now it has to work at Microsoft’s pace, and wait for Microsoft to do things before Nokia can do things. That might work, but it might also be a disaster.
Regarding Android: Nokia’s decision to go with Windows Phone 7 doesn’t hurt Android much. It would have been better for Google had Nokia chosen Android instead. But if anything, this may push some companies (like Samsung or HTC) that are split Windows-Android further over into the Android camp. Anyway, Android has done really well mostly because of carriers, and less because of hardware makers making magical phones. So unless Nokia can talk a bunch of big carriers into favouring Nokia’s Windows phones over Android in its marketing strategy, not much is going to happen.
Bigger picture: If you look at most of the consumer products that have done REALLY well over the last decade or so — Apple’s iPod, the BlackBerry Pearl, Apple’s iPhone and iPad, Microsoft’s Xbox, Nintendo’s Wii — they have something in common: The same company designed, built, and tightly integrated both the software and the hardware. This is the ideal, we believe, and by going with third-party software, Nokia is taking a huge risk.
Maybe, just maybe, Microsoft’s partnership with Nokia will be able to accomplish this same tight integration. Perhaps this is Nokia’s only good option, because the software it has been creating in-house hasn’t been cutting it. Maybe this will give Nokia some time to rekindle its in-house platform capabilities, the way Palm became a Windows Mobile shop while it was developing WebOS.
But the odds are not in Nokia’s favour.