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  • The Tragic Fates of Microsoft and Nokia

    February 9th, 2012

    As you know, we've been running a series of articles strongly suggesting that Microsoft is on the skids, suffering from what has become a long-term decline. With the major part of their sales coming from legacy products that are no longer growing, they need to find ways to succeed in the mobile space. So far, they haven't done so well.

    But there's yet another tech company that's seen its best days, and I wonder whether they are making decisions that will sacrifice their future too. It all comes to the fore with the news this week that Nokia plans to axe another 4,000 employees from their rosters. This cutback involves people who assemble Nokia smartphones in Finland, where Nokia's headquarters are located, Hungary, and Mexico. As with many other tech companies, this factory work will move to Asia. Since September 2010, when former Microsoft executive Stephen Elop took over as CEO of Nokia, a total of more than 30,000 jobs have been shed.

    You almost begin to think that Elop has earned the label as a slash and burn specialist, but I wonder how well it speaks to his capabilities as an executive or lack thereof. For example, in the last quarter, Nokia reported that earnings had fallen by some 73%, and smartphone sales had contracted some 31%. Clearly Nokia is having problems getting a solid footing against Apple and Google's Android partners, most particularly Samsung.

    Last year, Nokia inked a pact with Microsoft to become first among equals in building smartphones featuring the Windows Phone OS. Microsoft even granted them a cool one billion dollars to as an incentive, or a bribe if you want to call it that. At the time, I wondered if Elop had come to Nokia as a stalking horse for Microsoft to resurrect their failed smartphone platform. But so far it hasn't happened, despite the arrival of the Lumia smartphone series. So why are they keeping Elop as head of the company?

    So far, Microsoft's smartphone platform continues to suffer, with a market share in the single digits and falling. At the same time, Microsoft is porting the face of that interface, dubbed Metro, to Windows 8. Perhaps they hope that familiarity will bring acceptance. As people migrate to Windows 8, they will embrace the similar look and feel of a Windows Phone device. As a matter of fact, it's not a bad interface. Reviews have been pretty decent, but in terms of the feature set, Microsoft continues to lag a year or two behind the leaders of the smartphone universe.

    As the iOS and Android continue to advance, Microsoft is stuck in the rear seat. While this situation didn't hurt Microsoft in the PC market, there's no compelling reason for someone to buy a Windows Phone handset just because Microsoft promises that critical features will come, but not for another year or two. By then, the same customers will already be ready to buy new smartphones that are even further advanced, as Microsoft continues to play catch up.

    Understand, I do not like to see a company go under. The executives will often suffer the least, since they've already made their riches, or have golden parachutes to protect them in case they lose their jobs. But when tens of thousands of people are left jobless, that's a tragedy of the first order. Certainly success isn't guaranteed, but a more prosperous Microsoft and Nokia will help fuel innovation and advance the state of the art, and, of course, keep workers on the job. I'd love to see a version of Windows 8 that trumped Mac OS X in critical ways, in the same way I'd love to see a version of Windows Phone that was superior to the iOS or Android.

    If Microsoft learns the true art of innovation, rather than shabby imitation, it will mean that other companies will have to advance their own platforms in order to compete. You'll have a wider selection of wonderful gear at your favorite electronics boutique, and your experiences will be far more rewarding. There's nothing wrong with that.

    But the real issue is that a skeptical public just won't give Microsoft and Nokia passes if they fail to deliver the goods this time. All the promotional gimmicks in the world won't stop people from ignoring these gadgets, or, if they buy one, taking it back to the dealer before the money back guarantee has lapsed.

    I won't pretend to know how Microsoft's problems can be fixed, or whether an executive shakeup would be sufficient to save the company. They continue to live under the 1990's illusion of Windows everywhere, naively believing that a 90% share of the desktop computing market ensures success going forward. Certainly they are aware that they need to do something to advance their mobile platform, but I wonder whether that deal with Nokia is the solution. Why not try to strike another deal with, perhaps, Samsung, which is second to Apple in overall smartphone sales?

    If Microsoft went to Samsung with a similar proposal, they would deliver the benefit of a platform that is not, so far at least, vulnerable to intellectual property lawsuits from Apple. Sure, Samsung would have to pay royalties for Windows Phone, but many smartphone companies are already doing that because of the fear that Android is infringing on Microsoft's intellectual property. Maybe if Microsoft offered a billion or two to Samsung, they might get somewhere, but if they don't deliver the compelling OS that will make customers switch from Android and the iOS, maybe it won't matter.

    Meantime, both Microsoft and Nokia are clearly living on borrowed time.



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    11 Responses to “The Tragic Fates of Microsoft and Nokia”

    1. Viswakarma says:

      Microsoft has always been a "shabby copier"!!! No wonder, Steve Jobs in one of his keynote addresses asked them to bring out the copiers!!!

    2. DaveD says:

      Oh, how the mighty has fallen.

      Nokia may soon be another name added to the dustbin of left behind technology companies.

      To watch a "beleaguered" company without vision and grabbing on to a ray of hope is sad for those who's been with Apple in the nineties. It took a real leader to come in and shake up Apple. Under-performing products were dropped and a focused look with Macs and Mac OS X became the new foundation of a profit-making future. The firm foundation stabilized Apple so it can look for new areas of growth.

      Nokia decided to grab on to Microsoft. Microsoft with its monopoly throne has a flushed revenue stream from Windows/Office for over a decade that is slowly drying up. I can see that the days of copying others are coming to a close for Microsoft. Where will Microsoft go to for innovations? It so strange to see the purpose of building a Microsoft retail store and then put it near an Apple Store.

      There was a purpose for setting up Apple Stores after years of bad experiences of the big box retail outlets. Apple produces beautiful, quality, easy-to-use hardware to sell. A retail store for Microsoft's products, why???

    3. Nik says:

      In the case of Microsoft - good riddance. We can live without their crappy products and without their ways to dominate markets while stifling innovation. I can count the number of worth-while inventions the company has made in the past 25 years on one hand (the mouse wheel and the windows task switcher. maybe I forgot one?).

      In the case of Nokia, it just makes me sad - this was an entirely avoidable decline. When the iPhone was introduced, Nokia was still sitting pretty, with 30% of the market and a number of high end handsets. And they knew they had to respond. But instead of throwing out Symbian and embracing Android, and becoming an excellent maker of phone hardware, they dillied and dallied until it was too late. They were too proud for Android but then bent over for a cool $Bn from Microsoft - there just is no rhyme or reason to it.

      What would have prevented Nokia from doing what Samsung was doing - full on Android, excellent hardware, excelling at manufacturing and distribution? The answer is: Nothing. All those people would still have their Jobs. Nokia would have lost some market share, but not all. Nokia would make money, and hire people.

      I mean - if Nokia competed on hardware vs. all other Android makers - would you bet against them? I wouldn't. Nokia has a whole history of great hardware design, great manufacturing and so on. Complete idiots.

    4. >> If Microsoft learns the true art of innovation, rather than shabby imitation

      Keep in mind that Apple ripped off the GUI, mouse and icon based interface from the Xerox Star operating system.

      Microsoft's Metro is nothing like Apple's interface.

      Do your homework ;-)

      >> I won't pretend to know how Microsoft's problems can be fixed, or whether an executive shakeup would be sufficient to save the company.

      Well you touched on it earlier in the article!
      1. Nokia is shifting their manufacturing to Asia (like everyone else) to compete on price.
      2. Microsoft fired a bunch of marketing folks because they need fresh marketing for the new product line.

      The Lumia series is a feature rich phone that has and original UI and very good performance.

      Microsoft and Nokia will do just fine together.

      Disclaimer: I’m long NOK (because I believe in the partnership.)

      Gene Steinberg Reply:

      @luke tomasello, NO! Learn your history. Apple didn't rip off anything from Xerox PARC. According to the Wikipedia entry on the subject and lots of other independent decimation of the period: "The first successful commercial GUI product was the Apple Macintosh, which was heavily inspired by PARC's work; Xerox was allowed to buy pre-IPO stock from Apple, in exchange for engineer visits and an understanding that Apple would create a GUI product." There was a later Xerox lawsuit against Apple, but it was dismissed.

      Microsoft can't sell Windows Phone without Nokia; there's no evidence they'll do any better with Nokia.

      Peace,
      Gene

    5. @Gene,

      Please reread wikipedia:

      "Members of the Apple Lisa engineering team saw Star at its introduction at the National Computer Conference (NCC '81) and returned to Cupertino where they converted their desktop manager to an icon-based interface modeled on the Star.[10] Among the developers of the Gypsy editor, Larry Tesler left Xerox to join Apple in 1980 and Charles Simonyi left to join Microsoft in 1981 (whereupon Bill Gates spent $100,000 on a Xerox Star and laser printer),[11] and several other defectors from PARC followed Simonyi to Microsoft in 1983.[12]"

      http://en.wikipedia.org/wiki/Xerox_Star

      Gene Steinberg Reply:

      @luke tomasello, That's in addition to what I quoted, which strictly concerned rights and licensing. The rest goes without saying. We know who went to Apple from Xerox.

      Peace,
      GEne

    6. @Gene,

      What you say is "The first successful commercial GUI product was the Apple Macintosh..."
      Who said anything about successful?
      The author of this article slammed MS for be a shabby imitator... I was pointing out that Apple ripped off their UI from Xerox.

      Your point about the Apple Macintosh being the first *successful* GUI is meaningless in this argument (since they did it on the back of Xerox.)

      Gene Steinberg Reply:

      @luke tomasello, I'm quoting Wikipedia. Didn't you notice?

      Peace,
      Gene

    7. luke tomasello says:

      lol, I give up.

      Gene Steinberg Reply:

      @luke tomasello, Good idea. You're too eager to prove something that you cannot prove, which is whether Microsoft/Nokia will be successful with Windows Phone. It might happen. It would be good to have more competition, but the window of opportunity is closing fast.

      Peace,
      Gene

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