Why Microsoft and Nokia Will Succeed
Rita is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Try and try until you succeed. Probably this is the philosophy that both Microsoft (NASDAQ: MSFT) and Nokia (NYSE: NOK) follow. Innumerable people have asked time and again why anyone thinks this time Microsoft and Nokia will succeed when they have failed in their previous efforts. And the answer is simple. If you remember, in Batman Begins, Bruce Wayne’s dad rescues Bruce from a well and asks, “Why do we fall, Bruce?” The answer: “So we can learn to pick ourselves up.”
Both companies have seen good and bad times, though Nokia has seen more bad than Microsoft. Windows Phone 7, Windows Phone 7.5, Lumia 610, Lumia 710, Lumia 800, Lumia 900 – all of these have failed to achieve what Nokia and Windows aspired. They have fallen but they have learned to pick themselves up, clean up the dust from their shoulders, re-sharpen their edges and fight back. Let’s dig deeper into why will both these giants succeed this time.
Why will Microsoft succeed?
In order to answer this question, let’s first ask what is Microsoft’s aim? Well, I am sure the aim is something huge and though I cannot spell that out exactly, I know an important piece is to gain dominance on the smartphone, tablet and computer operating system space and a leadership position in the tablet devices space. After huge success in the laptop and PC operating system space, Microsoft now wants to see the same thing happening to smartphones and tablets. To date, though, Windows has been the most widely used OS on computers; it could not get a proper grip on the smartphones segment. When Windows Phone 7 was launched there was a lot of hype about the platform but eventually that boiled down to nothing. Even its successor Windows Phone 7.5 failed to create ripples.
The Problem:
In a space where Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG) are being able to rule, why was Microsoft falling behind? Because Microsoft was not providing the “converged devices” experience that it's now developing. Apple has created a feeling of being connected among the iDevices and the same is being done by Google’s Android. Be it Samsung’s Galaxy Tab, Amazon’s Kinde Fire or Google’s own Nexus 7, the users are getting a combined user experience between their tablets and smartphones thanks to the common Android platform. Unlike these two giants Microsoft was playing it solo with mobile OS, which though pretty advanced, failed to provide a complete user experience due to the lack of converged devices.
The Solution:
Microsoft has identified its problem and has put in substantial efforts to correct it. With Windows 8 and its younger sibling, Windows Phone 8, Microsoft will deliver an overlapping user experience. The company is going for a total overhaul, leaving behind everything from the past and developing a never-before seen platform. Until now though Windows was available on PCs and smartphones, the experiences were limited to each product domain only and was not overlapping -- these were no synergies between Windows 7 and Windows Phone 7.
People already using Windows on their PCs are likely to stay with Microsoft. New buyers will surely go for Windows 8 since Windows has a already proven reliability, and many among the old users will upgrade to the new platform since. People looking at buying tablets now have Surface as an option. Surface isn’t going to be like other tablets, and will be much more powerful and thus more attractive to users. If people start choosing two of these products, then the third product – Windows Phone 8 powered handsets – will also become an automatic choice, empowering Microsoft to deliver the “converged devices” experience.
Microsoft has eyes on both smartphone and tablet markets. But I think it has a stronger focus on the tablet market. Microsoft is making software for both smartphones and tablets, but is developing only tablet devices and not smartphones. Instead, it is leaving the smartphone device development to established phone makers. Smartphones have been around for a long time and since they are cheaper than tablets, they are much more prevalent. On the other hand, though tablets are gaining popularity, they haven’t reached a high acceptance level. With Surface as the game changer, the company wants to tap into the huge unutilized prospects of this market and bridge the gap between tablets and laptops. Earlier the concept was that a tablet will accompany a smartphone. But now, Microsoft seeks to reverse this and make a smartphone accompany a tablet.
Why will Nokia Succeed?
Nokia is a phone maker and not an OS developer. In today’s tight competitive consumer electronics environment phone makers such as Nokia, Samsung, Sony, HTC, Motorola are all at par when it comes to quality of handsets and their feel. Even the specifications are more or less the same depending on the product price category. So what is it that sets them apart? Factors that are not in the phone maker’s hands, such as consumer perception, and factors that are in control such as the choice of which OS powers the devices. Though Nokia was making excellent handsets, the Windows Phone 7 OS that was powering the device pulled back the demand for the handsets. After all, what’s the use of a powerful handset when the OS itself is not that powerful and attractive? Handsets just provide an interaction point between the user and the OS.
Now that the latest Nokia handsets will be powered by Windows Phone 8, the company has a better chance to sell its devices and change its fate. Nokia also has got an exclusive arrangement with Microsoft, which enables it to get its hands on the new OS almost a month before other players get it. This will surely prove as a major success point for this Finnish phone maker. To simplify the entire discussion, I feel, Nokia will succeed this time because it’s a part of the Microsoft Windows ecosystem now. The success of Microsoft will surely have a roll over effect on Nokia.
Concluding thoughts
No one is saying things are going to be smooth and easy for Microsoft and Nokia. Stiff competition will continue to come from Google and Apple. With the craze for the iPhone 5 skyrocketing and breaking all records set by all the iPhones to date, both Microsoft and Nokia are about to face a competitive holiday season. But it’s not about just this holiday season. Rather, the success of Windows 8, Windows Phone 8 and Lumia handsets are long-term goals.
We must remember Rome was not built in a day. What these two giants are doing is a beginning that will be followed up by several innovations on their part only. Microsoft is also making good progress with the Windows 8 launch. Recently Microsoft announced that the platform has reached the Release to Manufacturing (RTM) and the company has all intentions to launch the product worldwide on Oct. 26. I believe great things are waiting for both Microsoft and Nokia.
analyse360degree has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, Microsoft, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
