Robert McLaws: Windows Edition

Blogging about Windows since before Vista became a bad word

In One Swoop Microsoft Purchases a New OS, Apple Dominance

Most of the tech press has it's anti-Microsoft bias so embedded into their souls, that they can't even recognize a good Microsoft play when they see it. And they have this deeply held notion that, because they are important and they live in the US, that their markets are the most important markets in the world.

But they are wrong, and this Nokia acquisition is case-in-point.

As I mentioned in my blog post yesterday, Nokia is the #2 handset maker in the world, second only to Samsung. Samsung is #1 because Asia is a huge market, and Asians love Asian brands (it's a patriotism thing, nothing wrong with that). But Nokia is right behind them, selling millions of feature phones to developing nations every quarter.

So far, Nokia and Samsung (plus a handfull of regional makers) are the only ones with the clout to really make any serious plays for the "next billion" smartphone users. Nokia is one of the most recognized brands throughout the Eastern and Southern Hemispheres, and is deeply entrenched in areas like mobile payments, operator billing, and phone experiences that bridge the divide between smart and dumb phones. There was a time not that long ago, when almost any cell phone sold in the US was either from Nokia or Motorola. Google bought one; now Microsoft has the other.

Apple has no such hold over the developing market. In a few days, you'll see Apple make it's first play into the "developing world" market with the iPhone 5C, which (no joke), stands for iPhone 5 Cheap. This is because Apple knows that it has already stripped its potential customer base dry, and is losing ground to Google consistently quarter after quarter. Sure, they get a bump every time a new version of the iPhone comes out, but then it's right back to losing ground. So they are just starting their push into the area of cheap handsets. But here, they will ultimately fail.

You see, Steve Jobs was an @sshole. He really was, you've read his biography. Most perfectionists are assholes. It's OK if you love someone who is an @sshole, just be honest with yourself about it. I'm both perfectionist and @sshole, and my wife loves me, so I'm all for it. The thing is, perfection doesn't come on the cheap. This is why Apple has always been a "luxury" brand. Because nice things that are made well are almost always expensive.

Every time Apple tries to do cheap, it fails. You could argue: "well, the iPod Nano is cheap", but it's not a standalone device. It requires a computter with iTunes to work, which is expensive, so that's not gonna fly in Africa. People forget that Apple was weeks away from total bankruptcy when Steve Jobs came back and borrowed a hundred million or so from Bill Gates. Now, Apple has come full circle, is without it's Chief of Perfection, and is moving back into the world of cheap. History will repeat itself again. What about Apple's current position makes you think they will be successful selling cheap stuff? Because they have a lot of money to burn?

UPDATE: Apple investigating worker-abuse charges at iPhone C supplier. Winners don't treat their workers this way.

Nokia, on the other hand, has a history that is several decades long of building quality, inexpensive phones. Its prior playes into smartphones, (like the N9 and the 808) never did very well before. Windows Phone is by far their most successful play into smartphones to date. But Nokia was extremely successful at the other end of the spectrum, and the Nokia acquisition brings the next billion smartphone users to Microsoft's doorstep on a silver platter.

As Nokia posted earlier today, Microsoft will continue evolving the Asha OS as their primary on-ramp to Windows-based smartphones in the developing world. They will bring more Microsoft services, like Xbox and Skydrive, to that platform. Along with the patents and manufacturing contracts, Microsoft now owns one of the most extensive set of mobile operator agreements on the planet. That means that Microsoft is now a huge player in NFC payments, and has the clout to push that infrastructure ahead in the US, where we are far behind.

Before, Microsoft had to bend to the will of the carriers when it came to updates, and didn't have the same clout as Apple. Now, Microsoft will be able to bully cell carriers into pushing out updates faster, so flacgship carriers won't drag their heels on updates (like AT&T and the Lumia 920).

And in the biggest coup for the company, Microsoft out-foxed Tim Cook's supply-chain expertise, by purchasing one of the most efficient production organizations on the planet. Now, when dealing with parts contracts from Asian, Apple will have to compete against Microsoft at every turn, instead of the other way around.

Apple was right, it is better to own the entire ecosystem. But Microsoft has *always* out-executed Apple in the end. Google out-Microsofted Microsoft with the Android platform. Now Microsoft just out-Appled Apple, and Google has a new problem in their rear-view mirror.



  • Les Nessman said:

    I think Apple did a pretty good job with the iPod Nano, the iPas Mini, the Mac Book Air, enough said

    September 4, 2013 7:12 PM
  • Les, you think the iPad Mini or Macbook Air will appeal to buyers in Africa or the poorer parts of Asia like India? Really?

    September 4, 2013 7:16 PM
  • Les, the iPod Nano *still requires a computer to operate*. It is not a standalone device, and therefore not useful in places like Africa.

    September 4, 2013 7:19 PM
  • Les Nessman said:

    Robert, you completely missed my point.  You made the bold assertion that "Every time Apple tries to do cheap, it fails."  I was simply pointing out that your assessment might not be so accurate given Apple's track record.

    September 4, 2013 8:25 PM
  • Chris said:

    I think you're forgetting one thing here. People have to buy these devices. Microsoft already makes what reviewers say is an excellent mobile operating system. Nokia already makes great phones with Windows Phone OS on them. Nobody is buying them (at least not many). So you can bully the carriers and out fox Apple's supply chain all you want, but that doesn't necessarily lead to sales...

    September 6, 2013 3:24 PM
  • Well, at least I know that you read most of the article, Chris. But the whole first part was how only Samsung sells more handsets. When the deal closes, those sales will be Microsoft's. And iPhone doesn't have the kind of following in India, Singapore, Indonesia, and Latin America that Apple has.

    So yeah, I'm pretty sure it will lead to more sales. Besides the 80M Windows Phones that will be sold this year, of course. Fastest growing OS by volume.

    September 7, 2013 1:49 AM
  • Chris said:

    The majority of Nokia handset sales are non-Windows Phone devices. Are these the sales that Microsoft will be getting? Is that what Microsoft was after when they purchased Nokia?

    September 7, 2013 4:32 PM
  • Chris: yes, that was a significant portion of the premise of the post. Microsoft now owns an on-ramp to smartphones, and it can ease the transition by providing its services to those phones now, that will easily transfer over when you upgrade. Apple does not have this, and neither does Google. And that was part of what they were after.

    So Microsoft gets to use the Nokia name, gets the Lumia phones, designs, future plans, and manufacturing capability, along with phones, designs, future plans, manufacturing capability, and an OS for a significant portion of the world's feature phones. It's a pretty significant loss for Google and Apple.

    September 7, 2013 4:58 PM
  • Chris said:

    Well, as 'pie-in-the-sky' wishful thinking as this post was, I think we now know the real reason behind Microsoft's purchase of Nokia. It looks like Nokia's contract with Microsoft to build devices for the Windows Phone OS was coming close to an end. And we now know that Nokia was testing the Android OS on their phones behind the scenes. Basically, if Nokia stopped making Windows Phones, the OS was dead in the water. Microsoft had to purchase the company to keep the handset production alive. And then there's the story of Nokia drawing down the 2 billion dollars in convertible bonds offered to it by Microsoft within the first week. Having financial trouble Nokia?

    Anyways, good job trying to spin this into a positive story...

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