When Nokias chief executive Stephen Elop announced that Microsoft would be Nokias new partner for smartphones, the announcement was aimed squarely at the share which plunged by 13 per cent. This confirmed that Nokias current phones are outdated and the company was treading a long and winding road to obscurity. In a quickening technology cycle, a companys lifespan is getting ever shorter, and constant reinvention is a necessity.
Mr Elop said that the company had talked extensively to Google, the other candidate for a deal, but that there was insufficient opportunity for Nokia to differentiate its products from others. There was also Google's strength in mapping which would offer very little chance for Nokia to get much out of its own strength in maps. Mr Elop acknowledged that Google didnt need Nokia, and that Nokia could not add much to Google. Looking at Windows Phone 7, however, Nokia can offer Microsofts offering a much needed focus on hardware, he said, and it can also enhance the mapping powers of Microsofts Bing search engine.
Although Nokia will have to pay Microsoft a licence fee, it will also have new access to potential revenue streams, such as advertising. So Nokias pact with Microsoft was not really a choice. Earlier this week, Mr Elop wrote an internal memo comparing his company to a man standing on a burning oil platform: by jumping into the icy waters of the sea, the man saved his life, he said. Whats most revealing about that analogy is how deep it runs: Nokia is better off now because it has not been badly burnt by staying where it is, but it is also fighting for its life in an uncomfortable ocean. The 13 per cent drop in shares would probably, therefore, have been far worse had Nokia not jumped yesterday.
Mr Elops analysis of his problems, therefore, is astute. But thats not to say there are not still profound problems: it had pinned its hopes on MeeGo, which was a new operating system being developed in partnership with Intel. It was so bad it had become an industry joke, yet Mr Elop said yesterday that the Nokia engineers who had built it would be the ones who would build the future of Nokia and plan the next major disruption in the technology industry. Mr Elop also said to analysts and investors that doing a deal with Google would have felt a little bit like giving up and not enough like fighting back. I conclude by saying Nokia is taking the risk; Microsoft get the free upside but as Apple takes the middle market and the Chinese the low end this is the end of Nokia as we used to know it. Visit My Website : http://wanarua.com