Nokia And Microsoft Unite To Establish Relevance In Smartphones

Nokia’s announcement in London on Friday that Microsoft’s Windows Phone would be its primary smartphone platform for the future represents a dramatic shift in its smartphone strategy, one that it hopes will resurrect its once-dominant position in that market. And Microsoft hopes that adding the scale, reach, and technology of the global leader in mobile phone shipments will establish its platform as “the third ecosystem” alongside those of Apple and Google. Our clients can read Forrester’s take from a product strategy perspective here; here’s a summary:

  • Nokia’s choice is the least bad among its options. Nokia rightly distilled its choice to among three, the alternatives to Microsoft being to stick with the Symbian and MeeGo platforms that Nokia controls or to join the Android bandwagon. Symbian has proven itself noncompetitive with customers, operators, and developers; MeeGo, with one lone device in the market, is a nonentity. Google’s platform would have rendered Nokia a “me-too” competitor — albeit one with massive scale — having to play catch-up in an extremely fast-moving market. Microsoft’s platform offers Nokia the possibility to create products that will motivate consumers and operators to buy, and help convince developers to elevate Windows Mobile in their priority list.
  • Microsoft significantly strengthens its hand. There is little — though not zero — downside in this deal for Microsoft. Redmond gets the scale of the largest phone manufacturer in the world, deep relationships — including, critically, billing — with more operators than any other OEM, access to local application developers around the world, and access to longstanding, deep expertise in mobility. The Navteq mapping solution alone fills a significant gap for Microsoft, not only in mobility but across its Live, Bing, and Xbox properties. Microsoft’s chief risk in making this deal is that of alienating its other licensees. It has already seen partners like HTC and Samsung shift momentum to Android; if these companies perceive that they are disadvantaged in competing with Nokia as a Windows Phone licensee, they could opt to ditch the platform altogether.
  • Success lies in both companies’ ability to differentiate and execute. While Forrester believes that both parties have made the best strategic choice available for their products, this union faces massive challenges for the partnership to prove successful. First, Nokia must prove that it can indeed deliver a complete product experience that customers will recognize as unique and superior — not only to its Android competitors but also to its competing Windows Phone licensees. Second, it must do so with considerable alacrity. The company stated in a press event at Mobile World Congress yesterday that it hopes to produce its first Windows Phone in 2011, but it will not bring a significant portfolio to the market in volume until 2012 — a lifetime in today’s smartphone market. Third, Microsoft must prove that its software, combined with Nokia’s contributions, can match or exceed what Apple and Google continue to deliver.

The reality? Despite planning to ship at least 150 million Symbian devices before the platform’s demise for new products, Nokia is a non-player in the smartphone market until 2012 and Microsoft will have to provide strong incentives to other licensees to maintain Windows Phone’s relevance in the interim. That’s a big matzoh ball for both of them.