Microsoft Defense Dance

Is Microsoft buying Nokia a final point of Ballmer failure? Likely not, but with his track record one has to wonder.

Microsoft is buying Nokia’s handset hardware business and licensing Nokia mobile technology patents (something that Apple also did after a nasty bout of litigation). Most folks think Microsoft is attempting to clone Apples 360° product offering. Microsoft already started down this road with their Surface tablets, which received rave reviews from both customers. Recognizing that they are desperately behind in the now-dominating consumer mobile market, Microsoft seems to be building a new product offering by bringing all the hard and software in-house.

(The obvious punch line is that Microsoft is adopting their own orphan since Nokia is the only handy maker squarely behind mobile Windows)

microsoft-nokia-nothingThe more interesting aspect of this news item is Nokia’s patents, which Microsoft is licensing (Nokia was wise not to sell that revenue stream). Nokia, the former alpha male of mobile, has a handy set of patents. Microsoft already gets most of its mobile division revenues from their own patents and has repeatedly used patents to make profits or restrain competitors (they even did so through proxies in the legendary SCO vs. Novell Linux litigation spree). Microsoft is fighting two fronts, against Apple and Android, and patents will help against the latter (as it already is). Slowing the other runners while you finish lacing your shoes is one strategy, but one that lasts only as long as the patents do.

Where Microsoft has fumbled, and where the Nokia buy will not help is in getting ahead of a trend. Mobile computing is nothing new. Even when the first portable computers were the size and weight of sewing machines, people understood the value of computing on location. Microsoft had a jump on the market which they failed to aggressively push, and which they then lost when Apple brought a different paradigm to phones. As Android proved, you don’t need to own a hardware company to dominate a market, you just need to offer something compelling. Without Windows being more meaningful for mobile people, the Nokia hardware investment adds nothing. Given the rapidly shrinking industry hardware margins and smartphone market saturation, it won’t help Microsoft’s top or bottom line.

Microsoft will remain a minor player in the mobile OS market mainly due to the downfall of Symbian and Blackberry. In a management study conducted back in the 1970s, it was noted that every market consolidates over time and typically has three gorillas that together own over 66% of the business. Apple and Android are the two gorillas and barring a miracle, Microsoft will sit with the chimps.

In marketing you can either play offense or defense. When coming from behind, defense is a strategy that will keep you behind. Microsoft is behind and making multi-billion dollar defensive moves. Microsoft needs their own Steve Jobs to see beyond the competition and create products that make people think differently about mobile. Until then all the hardware purchases and licensed patents will not slow their fall.


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