Can Nokia really afford another two years "in transition"?
First WP7 devices will arrive in 2012, so this year holds "significant uncertainties"
Published: 14 February, 2011
As the dust settled around Nokia's announcement of its alliance with Microsoft on Friday, the discussion shifted from strategy to reality - particularly, how quickly would any real results start to shift the market?
Nokia said it was now a "company in transition", for 2011 and 2012, the time it will apparently take to create the promised WP7 knock-out devices that will take on the iPhone, Galaxy S - or whatever superphones and tablets have appeared by 2012. CEO Stephen Elop is known to be impatient at the slow pace of execution within Nokia. The Symbian^3 strategy started off ambitious, but too much time was taken open sourcing the platform - in the end, a futile gesture - rather than getting products to market. The result was that, when the N8 flagship did appear, it was looking far less stunning than it would have done a year earlier. And of course, interest in the truly innovative MeeGo has been diluted by the failure to launch a single Nokia device in 12 months.
Will Nokia fare better with WP7? Probably, though its new friend's track record on timely product launches is hardly stellar. But much of the latest reorganization of Nokia was geared around speeding its time to market and making it more streamlined and responsive - even if this came at what may prove a very high price, in effect reverting to being a hardware firm, and placing the web services and software strategy entirely in Microsoft's hands.
But even with a more efficient approach, there will not be a Nokia/WP7 device until 2012, and that means another year when the company will have to tread water on the back of its installed base while it readies the new offerings. The firm said it would not set 2011 targets because of "significant uncertainties" and is now regarding 2011 and 2012 as "transition years". Considering that 2009 and 2010 were also transition years (towards open source Symbian, towards a full web platform, towards MeeGo), this is far too long for any player to remain inactive. Once the transition to its new strategy and partnership with Microsoft is in place after 2012, Nokia says its devices and services revenues will grow faster than the market and to hit double-digit operating margins again. It's a long time to wait, and will certainly console Google for any disappointment that it did not succeed in getting the world's largest handset maker to adopt Android.
There are risks for Microsoft too, in this long transition. The other WP7 partners may become less interested now that Nokia is on board, especially with very special terms. Both firms were keen to stress that this was not "just an OEM relationship" but something far deeper, and it is clear that Nokia will have extensive license to customize and add to WP7. Elop said: "We have the ability to do customisations and extensions to the software environment that are unique and therefore differentiate. It's very important to understand this is not a standard OEM agreement. Microsoft is placing a big bet on us."
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