Analysis: Nokia’s Huge Bet On Windows Phone 7 is All or Nothing

Feb 11, 2011
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I was getting a sense earlier in the week from contacts of mine close to both Nokia and Microsoft that Nokia was going to pick Windows Phone 7 as their smart phone platform of choice. Initially I thought this was crazy given that all the momentum is with Android, it appeared as though picking any other smart phone platforms was suicide. However the more I thought about what this partnership means the more I think it makes sense.

This is an incredibly bold decision by Nokia. There isn’t a shred of evidence that Windows Phone 7 is gaining any momentum in the marketplace. Not with consumers, not with developers and not with handset manufactures. For Nokia to have chosen to go with Microsoft’s mobile platform their executive team must believe that they can single handedly inject new life into the platform.

They Must Attract Developers
This may be blatantly obvious however it is still an important point. As it is developers have to split resources and strategically choose which platform to support and develop for. Right now iOS and Android have the majority of developer mindshare. RIM is still there to a degree, webOS with HP’s help is going to attempt to attract developers and Windows Phone 7 has been there to a small degree as well.

For this to be successful, Nokia will need to use whatever market forces they have behind them to get Windows Phone 7 toward the top of the list of developer mindshare. Perhaps the sheer volume of handsets Nokia makes and ships globally will help this. If Nokia can convince developers that not only can they make good money on their platform but also attract them with a large TAM (total addressable market) then perhaps developers may take them seriously.

That, of course, will not be easy, especially since Apple and Google are not taking the proverbial foot off the gas.

Nokia Must Differentiate
One of Microsoft’s initial points in talking to potential licensees is that they were going to discourage any software customization by the vendors. It appears that is no longer the case, or at least not the case with Nokia. Since Microsoft is going to give Nokia some freedom to customize whatever they please, we will see how Nokia takes advantage of this. If Nokia fails to differentiate with either incredibly innovative hardware or a unique software experience they will fail.

One observation about Microsoft’s giving into Nokia’s demand for customization. What about other vendors like HTC or Samsung or others who may want to do some customization as well? HTC, for example, would love to put their Sense UI on devices they make running Windows Phone 7; Microsoft up to now has not allowed it.

The short answer is if Microsoft does not treat each vendor equally they will lose a lot of potential licensing deals. If they tell other handset vendors that they can’t have the freedoms that they are giving Nokia they better be prepared to lose a lot of vendors as partners. If that is the case it becomes Nokia and Microsoft against everybody else.

Will This Partnership Work?
Interestingly, it may work better in parts of the world where Nokia has a strong presence before it works in the US. Given that global smartphone growth is increasing incredibly fast as well, I doubt either company considers this a downside. Microsoft has a decent presence on PCs in many other parts of the world and I can see their mobile platform becoming attractive in many of those global locations with Nokia’s help.

As Stephen Elop said, they are up against a monumental challenge. If this decision does not pay off for Nokia it may be too late for them to do anything else. I keep saying we are living in interesting times. Things just got even more interesting.

What do you think, is this a good or bad decision?


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