Nokia and Windows Phone 7
I've just been reading up on the new Nokia/Microsoft deal and I can't decide if it's a good idea or not.
Nokia clearly needs to do something. They are huge, currently selling more phones than pretty much every one else combined but the problem is the phones they're selling lots of are cheap handsets with very low profit margins. Smartphones are where the money's at, and it's here that they're in trouble. Nokia sells loads of smartphones too but every year their market share erodes more and more and it looks like they have nothing that can stop this tide from going out - Android, iOS and BlackBerry are eating Nokia's lunch in this space.
One thing they do very well is hardware - Nokia phones are superbly put together and the smartphones have featured things like great cameras, GPS, bluetooth etc often years before competitors fitted such things to their phones. No, there's no problem with the hardware. The problem lies in the software. They've tried for several years to bring their own OS, Symbian, up to a modern level but haven't quite got there - the touch interface is clunky and the mess underneath sometimes shows through with things looking like they've been tacked on as afterthoughts and the whole experience being somewhat cumbersome.
So what about Microsoft? They too had a smartphone OS, started in the mid-to-late 90's, which evolved to include touch input (but only with a stylus for many years) and was pretty popular on many devices. Lots of manufacturers built phones running Windows CE often skinning them to set them apart from the masses. But it suffered from the same problem as Symbian - it was incredibly clunky. Even in later versions where you could use your finger for touch input the user would often come up against menus and scrollbars which couldn't be used without a stylus making the whole experience frustrating, even more so when the poor user looked around at all the people using the iPhone and tapping away happily.
So Microsoft did what they had to do - created a brand new OS from scratch, built from the ground up for touch input using only fingers, designed for modern high resolution displays and incorporating all the current social networking technology such as Facebook and twitter feeds. This OS they've licensed to many handset manufacturers but they've learned from Apple: You are not allowed to skin the OS or put on operator branding, there are strict minimum hardware requirements so that the experience is always fluid and smooth. Windows Phone 7 is actually a really nice OS, although missing a few things which I consider normal in smartphone operating systems such as multitasking and cut 'n' paste (although this is coming in an update). They've dared to try something different with the UI, not simply followed what Apple has done with iOS like so many others.
So why am I unsure if Nokia using Windows 7 is a good idea? Surely well built hardware (Nokia) with a clean, fast modern OS (Windows Phone 7) is a match made in heaven? While I believe they would be a good match I'm worried that this signals the start of Nokia becoming a "me too" handset maker. There are many handset manufacturers using the same OS on similar hardware and at that point the manufacturer becomes less relevant. Nokia could simply fade into the mass that is Samsung, HTC, LG, Motorola, Sony Ericsson etc and fight it out in the low margin handset game, surviving on margins of less than 10 percent, probably closer to 5 percent. Nokia has one advantage that the other handset makers don't have and that is their deal with Microsoft allows them to have a say in the future direction of the OS and to customise it up to a point, something that can hopefully differentiate them enough so they can stand out from the crowd. Also licensing an OS off the shelf means they can save a lot of money on R&D of their own software.
We'll have to wait and see how it all pans out, but I can't help feeling a little bit sad at this news. The once great Nokia, a company that fought for years to not be another Microsoft licensee is now simply one of the mass producers and will have to duke it out with the powerhouses from Korea and China.
UPDATE: Just noticed that the Nokia stock price has dropped from around $11.50 to $9.50 on the back of this news so I guess a few others aren't sure if this is a good move or not...