Microsoft is lost, clueless, and stumbling in the mobile space, and the latest twist, turning on its own, shows it has no idea where to go next. If you thought the current mobile debacle was bad, you haven’t seen anything yet.
You might recall that Microsoft triumphantly unveiled it’s new Surface branded tablet two weeks ago with two versions. One is running the full blown Windows and uses an Intel CPU, the other uses an ARM CPU and runs WART (Windows on ARM RT). WART devices are pointless, they run absolutely no software, are not compatible with x86 Windows software, Windows Phone 7 and prior software, and are as welcome on your lap as their namesakes. There is absolutely no reason to buy one over an iWidget or Android ID (Infringing Device), and worse yet for Microsoft, no reason for a vendor to code for it over Windows the Older.
Instead of taking the normal route of selling an OS, Microsoft looked at the smoldering embers of their phone program and decided that the only thing it needed was more of what took Nokia from #1 with 30+% marketshare to teetering on the edge of bankruptcy in less than two years. Yes, when Windows Phone 7 launched, Microsoft’s phone marketshare was in the double digits, although just barely, and Nokia had more than 30% smartphone marketshare. Two versions and hundreds of millions in advertising campaigns, backed by bottomless slush funds and attack campaigns, Microsoft’s ongoing mobile marketshare is sub-2%, counting both Nokia and ‘other’.
At this point, even the most strident Microsoft fans have to admit that the Windows Phone strategy is a failure of epic proportions. There is absolutely no up side to this catastrophe, even the analyst firms are having a hard time justifying the absurd numbers they are paid to promote. I mean “independent research and forecasting reports”, no need to ask about their funding sources. Please believe that they aren’t paid shills, and don’t laugh at their conclusions in public. Please. Really. They have logos and expensive reports that look professional, just don’t use any critical thinking skills when reading them. Not that this will stop Microsoft from paying for the best ‘independent research’ that money can buy, some fools still think the big firms are credible. Fools.
Back to phones, there are two schools of thoughts on the Nokia/Microsoft mobile disaster, the first is the companies really intended it to succeed. Given the reaction from everyone in the industry to the initial plan, and how closely the spectacular failure mirrored everyone’s predictions, Gartner, IDC, Forrester et al aside, the result wasn’t unfathomable at the time. Somehow, everyone but Microsoft and Nokia seemed to see the end result.
That means that Microsoft’s mobile strategy folk and upper management either incompetent or, well, there is no or. If Microsoft intended the Nokia implosion to be a real chance for their OS to take marketshare, they should be fired. Now. Actually no, keep them on and promote them, from a reporter’s perspective, you can’t buy a better story, even if it isn’t worth the cost the poor Nokia employees are paying.
The other school of thought, and this one is shared by the author, is that Microsoft had no intention of letting Nokia succeed. Instead, they put an incompetent sock puppet in place to do their bidding and purposely run the company in to the ground. Elop, the Manchurian CEO, succeeded beyond their wildest dreams. Why? Because Nokia was a competitor, was working with Intel to make a phone, and was promoting a Linux based OS. Microsoft could not buy Nokia outright, the EU would have rightfully laughed that out the door. Instead they put Elop in place and had him promote a ‘strategy’ that had no chance of succeeding. Once Nokia had burned all the bridges that could have saved it, most of the remaining pieces would be unpalatable to any potential buyer.
Microsoft could then step in and buy the remnants of the once proud firm for a song. Even counting the initial Windows Phone transition money, the net cost would be far less than buying a healthy Nokia even if that would make it past the regulators. And they don’t have to dispose of the workers either, that will be done long before they step in to ‘save’ Nokia.
What is the prize? Patents. Nokia has fundamental patents on just about every bit of the mobile space, and that is a huge prize indeed. When Nokia goes belly up in a few quarters, unless things are split up, the buyer gets the biggest patent haul in mobile history. If they split the company up, the bidding war for them would be intense and bitter. It is looking like the only profitable and growing part of the mobile device segment in 2013 will be patent trolling, and that has not escaped any of the players.
So consider this scenario. When Nokia is inarguably terminal, and just a few months away from bankruptcy, their valiant and foresighted CEO holds closed door meetings with the board and regulators. He shows them the grim numbers, and when their eyes can focus again, says the company has one hope for survival. Microsoft has generously offered to buy the whole thing, but it has to be the whole thing, and will fund it until it is profitable again. No jobs lost, the pride of Finland is still in Finland, still employing Finns, and there really is no plan B. Anything else would shutter the company and loot the patent stash.
Microsoft looks to have effectively engineered Nokia into a position where purchasing the whole company outright is the best of the unpalatable options. They get the patent stash, wait a few minutes until the regulators look away, and then shut down the rest. None of this has to be done in public, and no one knows, much less can object until after the deals are signed. Quite convenient don’t you think? Anyone think this isn’t going on?
Moving back to tablets and mobile, Microsoft is putting the same brilliant ‘strategerists’ who took their phone share to 1/6th of what it was two years ago, and tasked them with fixing their tablet woes. If the first scenario, incompetence, was the case, they are already off to a much quicker start.
This time though, it will likely reverberate in to their core businesses, Windows and Office. Why? As SemiAccurate said earlier, HP was only the first, all of the OEM ‘partners’ are at least as annoyed at Microsoft over Surface, but some are more politically savvy about how they display that displeasure. There will be payback for Microsoft’s backstabbing, count on it. Google however has at least seven new best friends in the OEM space, possibly more, we stopped asking after the seventh response. The incompetence scenario means that Microsoft will have even less traction in tablets as they did in phones, they aren’t quite at zero yet.
If Microsoft wanted Nokia to fail, the result is quite possibly worse for Redmond’s tablet ambitions. Why? It would signal that they have no intention of allowing tablets to exist anywhere. Any Windows or WART tablet sales would controlled by Microsoft on Microsoft hardware, the OEMs are unable to compete if they have to pay 20% of so of the BoM in license fees.
With the Nokia patents in hand, Microsoft can put in place a scorched earth policy, forcing any tablet maker to pay absurd license fees or be shut down. Those license fees would once again make the other alternatives cost too much to be viable, leaving only Surface. Kill all, kill all, Steve shall know his own. And the monopoly is protected, emerging markets be damned.
In the end, two things are clear. First, Microsoft has utterly failed in the mobile space, if they ever intended to succeed in the first place. Second, rather than learning from their past mistakes, they are repeating them for tablets. Taken together, it is painfully apparent that Microsoft management does not comprehend mobile computing. Instead of modifying their strategy to deal with the new realities that face them, they are circling the wagons ever tighter to disastrous effect. The question now is not if the mobile plans will work, they won’t, but how much the repercussions will end up costing.S|A
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