Microsoft and Nokia: A win-win for enterprise smartphone use

Now that the dust has settled around this industry shaking partnership, there's more for enteprises to like than dislike.

Microsoft’s latest mobile offerings were greeted with a comparative yawn. Nokia, once the unstoppable ruler of mobile had similar problems: outdated product line and a platform that needed several leapfrog moves to become competitive in the burgeoning smartphone race. Add an ex-Microsoft employee turned Nokia CEO, and Microsoft’s CEO Steve Ballmer with lots of spare cash to buy a renown mobiles maker’s attack surface, and it seems like kismet.

Nokia WP7 concept phones
Indeed Nokia is a ten billion euro internationally entrenched organization that’s been purveying mobiles, including phones, notebooks/netbooks, and other gear for years. About seven billion euros is the device and support services portion of revenue, and that number has been comparatively stagnating. Apple, Android phone makers, and RIM/Blackberry, have taken the smartphone marketshare and claimed turf.

Prior to the agreement with Microsoft, Nokia had evolved an open-ish platform known as Symbian. It had also signed on to the Linux-derivate platform promoted largely by Intel known as MeeGo. Now it goes. In its place are Microsoft’s Windows Mobile editions, along with whatever might be in store for tablets and evolved products under the Windows 8 continuum. In the meantime, much Symbian work will begin to wane as the conversion to Windows takes place.

Will Microsoft connect a Windows 8 tablet to something built by Nokia? Perhaps. Windows Mobile 7’s links and functionality compared to Windows 8 hasn’t been discussed yet. Does Nokia have an inside relationship that will go beyond what other Microsoft OEMs have? This is tough to say. Nokia is somewhat captive in this relationship, but they also have the need to boost sales and compete heavily with Southeast Asian manufacturers.

The bottom line is that these are two very well capitalized organizations that have signed quite the partnership deal. When you add Microsoft’s Skype acquisition to the deal, it makes the potential value proposition (and incumbent telco headache) all the more the interesting. Competition here is fierce: iOS, Android, WebOS, and Blackberry are all growing like mushrooms, but the clear current winner is Android. Microsoft already makes more money from Android licensing than it does from their own Windows Mobile offerings. A year ago, Microsoft strong-armed HTC into signing a licensing deal for Android phones that an analyst last month pegged as generating $5 per phone in royalties for Microsoft. Microsoft has had a long-time patent deal in place with Samsung and while the payoffs of that licensing agreement, and others, aren’t known, Microsoft makes about $15 per WP7 license but has only sold about 2 million of them. Microsoft is working to change that, and Nokia’s commitment is part of the crux of that change.

One of the important components that Microsoft purchased in the Skype deal was a list of 100 million Skype customers—many of them international, and most all of them are set up to pay money. These are working customers, not free ones. They have real names, addresses, and ostensibly means to pay Skype.

In a similar way, Microsoft gets to snack on Nokia’s customer base, another list that will likely become long, is international, and knows how to pay money. Amazon showed the world that it could snack on Google’s Android revenues by worming their way into the Android Apps marketplace with one of their own. Microsoft gets to evolve their base similarly by marketing a rival ecosystem based on Microsoft’s simplicity marketing.

Nokia gains coverage by Microsoft’s updates to its System Center: Configuration Manager 2012, which will put the forefront of control (this judged from early looks at the product) on systems running Microsoft’s own software. Nokia’s international (and entrenched) sales and support systems become an ally for Microsoft to sell WM7 products into markets where it hasn’t been successful. And although its rivals have depended on Internet sales, Apple and Google aren’t talented at fleet sales; RIM and HP (with Palm/WebOS phones) however, have been and these are

Microsoft’s initial rivals in business/organizational sales. Although the Microsoft-Nokia partnership looks like two come-latelys on the surface, in reality, the combination of Microsoft and Nokia could be powerful competitors to the consumer-driven organizations of Apple and those that sell Google’s Android on their phones. This leaves corporate-poised sales organizations of HP/Palm and RIM/Blackberry as corporate sales competitors. I’ll bet both Microsoft and Nokia like that kind of playing field better than the one started by Apple and its competitor—Google.

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