If they can become a low-end competitor, then there may be an opportunity available in the emerging markets. But they are pouring tremendous resources into the US and Europe saying Lumia is better. That is likely to fail
In discussing the future of Microsoft and Nokia, we must try to answer why they got together in the first place. While there may not have been many strategic reasons, I think there were several pragmatic ones. For Microsoft, Nokia represented the biggest source of momentum for the Windows Phone platform, meaning if Nokia suffered, there may have been an impact on Windows Phone’s market share and perception. Something as innocuous as a bad quarter for Nokia could risk destroying that momentum.
Also remember, Nokia was getting $1 billion in annual payments from Microsoft for using Windows Phone, an agreement that was due to end in 2014. Maybe Nokia would’ve said, “We need more money,” and that would’ve forced Microsoft in turn to think, “If we have to pay them $2 billion a year, why not just buy them out?” And Microsoft did pay a relatively low price for Nokia.
Today, now that the market is over 1 billion users and going to very rapidly saturate, the challenge for Microsoft is their assumption of wanting to keep on trying. It’s hard to believe that after so many tries and so much saturation, they can succeed. Worse, their strategies are symmetric, meaning they compete against an Apple or an Android by claiming their Lumia devices are better. They are not saying “We will create an entirely different market,” which is what Apple did with the iPhone. When they entered the market they didn’t say that BlackBerry was a worse phone, but that BlackBerry was doing it all wrong. Microsoft instead is a combination of brute force, giant-meets-giant and Charge of the Light Brigade. It comes from their lack of humility and that is why it will never work.
(This story appears in the 10 January, 2014 issue of Forbes India. To visit our Archives, click here.)