Rob Enderle/IT Business Edge
March 04, 2011
Nokia and Microsoft announced a strategic alliance that could define the futures of both firms. They had no choice because, right now, Apple is the company for both to beat. It isn’t Google with its Android offering, and you can confirm this by looking at the drama at Verizon and how T-Mobile positions itself against AT&T and Verizon.
Revisiting the Unbeatable iPhone
The iPhone is an iconic product backed by the single strongest marketing-driven company in the consumer electronics market today, if you measure strength by profit, valuation and the ability to drive a market. It has more applications than any other platform and it is the only product in its class that has people lining up to buy or preorder it. Currently, the Verizon product isn’t selling as well as expected, but that isn’t because of a competing offering, it is because people preordered or are waiting for the iPhone 5. The only real limitations the iPhone has is that Apple tends to be a U.S.-centric company, which means that the iPhone does better here. Also, Apple is carrier-bound, which means that it initially only existed on AT&T and now only exists on AT&T and Verizon in the U.S.
There is one other weakness the iPhone shares with the other smartphones and that is the cost of the data plan. If you could uniquely address this, there might be a way to surprise Apple. I’ll get back to this in a bit, but Apple enters this year not limited by Google, but limited by its own decisions.
No one has ever beaten Apple by chasing it. No Mac-like product ever beaten the Mac, no iPod-like product ever beaten the iPod and no iPhone-like product has ever single-handedly beaten the iPhone. It is likely that no iPad-like product will ever beat the iPad. But Windows did beat the Mac OS and Palm clearly eclipsed the Newton. You can flank Apple or you can benefit from an Apple error, but when it is on its game, you can’t catch the company from behind.
Android: Dead Platform Walking
Android is a shell currently under heavy litigation threats by Oracle, Microsoft and Apple. Google apparently can’t, or won’t, defend it. No single Android phone has ever risen up to challenge Apple. In volume, there were – before Apple moved to Verizon – more Android phones sold, but Google officially reports no revenue or profit numbers from its effort. It appears that license revenue flows to Microsoft, which suggests that Microsoft may, at least in certain cases, make more money off of Android than Google does.
However, it’s the only alternative that has a sufficient number of applications and buzz in the consumer space. Microsoft never really developed the applications on its older versions of Windows Mobile. Research In Motion has been having trouble being relevant outside of two-way pager business markets and Palm hasn’t been a major player in this market for half a decade. Nokia, the biggest cell phone company in the world, has been lost in a mess of operating systems and conflicting initiatives that were slowly bleeding the company out of existence. Android was, the key word is “was,” the only real alternative, but getting sued and losing your profit margin as a result was hardly the outcome its partners wanted.
Windows Phone 7: In Search of Relevance
The big problem for Windows Phone 7 is its relevance with developers. The recent surveys I’ve seen suggest that about a third of developers are focused on the iPhone, about a third on the iPad and Android gets most of what is left. I’ve also been told that while developers are making money on the first two platforms, Android users appear to overwhelmingly prefer free applications and that has made this platform a poor third choice.
Windows Phone 7 looked promising, but it simply didn’t have the sales volume to get developers interested, largely because the vendors that sold it seemed to place it behind Android. This created a cart and horse problem: Without dedicated support from a major phone supplier, Windows Phone 7 couldn’t reach the volumes it needed to challenge Google, let alone Apple, and no major vendor, until now, was going to give it that support until it demonstrated that it could get the volume.
Nokia: Avoiding Life Support
While Nokia fans seem to be revolting at the moment, and I agree with top pundits who are calling them nuts, Nokia needs a Hail Mary pass or its new CEO is going to be turning off the lights in a few short months. Nokia has more shelf space and reach than any vendor on the planet, but in the trending smartphone space, particularly in the U.S., it has been non-existent. But Nokia is strong where Apple is weak: outside of the U.S. and with products that don’t require data plans. It also represents a major brand that customers still trust and cell phone vendors still respect, simply because of its historic position in the market. Nokia was also being sued by Apple and needed a partner that could help it defend against that attack, not one that would throw it under a bus as Google is apparently doing with its partners.
They Still Have to Execute
A few years back, Palm partnered with Microsoft. Palm hedged its bets and didn’t bet fully on the platform and Microsoft failed to execute timely on a platform refresh. Palm went back to a proprietary approach and failed selling itself to HP. Microsoft was left with the poor market position it has today.
Both Microsoft and Nokia are going to have to step up to the challenge more sharply than they have before. Microsoft will have to execute on getting enough applications to be interesting and continue heavy funding on well-executed marketing and placement (it has a tendency to not understand the importance of demand generation at executive levels). Nokia will have to focus on making this work and if either company drifts, the other will have to do whatever it takes, and I do mean whatever it takes, to get the partnership back on course.
Both companies are cursed with a history of missed opportunities. Both could have had iPhone-, iPod- and iPad-like products in market before Apple and now both look longingly at Apple’s backside. If they don’t want to forever be on the backend of Apple, they will need to get off their own butts and execute this time.