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12 February 2011

Today We Wake to a New Nokia

When a company "leaks" an internal memo that describes its current position as like being stuck on a burning oil platform, you kinda know big changes are about to be announced. In the moments following the leaked memo, Nokia and Microsoft (yes, Microsoft!) held a join press conference to announce a strategic alliance between the two companies that will be worked out in the coming months.

It seems that the leaked memo was to prepare the hearts of the Nokia faithful of drastic changes to the company but few would have expected this. Nokia has long been a leader in the mobile phone wars with regard to their hardware development which has often produced superior phones. However, its been the lack of development in the software or apps over the last few years that has seen relatively novice players Android and Apple gain a growing market share in what used to be the incumbent's bread and butter. 

Microsoft has also struggled in the past few years with carving their share of the growing market for mobile devices and only recently announced a "game changer" with the WindowsPhone7 (WP7) mobile operating system which was enough to make the industry stop and take notice. Following this, a Microsoft executive was chosen as the new CEO for Nokia and the conversations that many felt were inevitable has brought the company to a very big change in direction. Symbian, which has been the heart of Nokia from the beginning has now been sidelined and the future of Nokia seems to be with Microsoft. Here is the announcement of Nokia and Microsoft entering into a strategic alliance.

Market reaction
On the day of the Microsoft and Nokia announcement, the sharemarket reacted by selling off Nokia shares causing a 14% drop in the value in one day. Microsoft hardly moved, only dropping 0.91%, possibly indicating that the alliance is better for Microsoft than for Nokia. Interestingly, Stephen Elop still holds an estimated $US7 million worth of MSFT shares

Nokia share price dips following announcement

Why we are not panicking...
This has been a big change for Nokia and the immediate gut reaction on the net is that Nokia has sold out to Microsoft. However, as many bloggers watching Nokia may have noticed, these recent events followed a prolonged period of silence from the new CEO as he worked to get an understanding of where Nokia is. It is after this careful fact-finding mission that Stephen Elop has concluded that Nokia's future is with Microsoft. 

Perhaps the decision is not based on his former ties with Microsoft but the conclusion reached after speaking to developers, engineers, marketing, middle management and consumers. Consider also that he would have predicted the backlash and cynicism that would eventuate if he decided to steer his new ship towards his previous company. Would it be worth the criticism and perceived bias? Apparently, the conclusion is yes.

U..S..A  U..S..A
Also Nokia watchers will know that the US media has never really warmed to the mobile giant and even now, Nokia phones are very rare offerings amongst US mobile networks. Maybe its the number of CEOs speaking in a non-US accent that has held down the news mentions. Microsoft, however, is one of the greatest icons in The States. I believe this alliance will also benefit Nokia in the US market (and of course, entry into the US mass media) as much as it is about Microsoft making billions of dollars on Nokia. The ocean provides endless possibilities. 

Mentions of "Nokia" spikes on Google News following announcement

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