Posts Tagged ‘Nokia’

Microsoft-Nokia Deal Poses Challenge to Samsung, Asian Partners

September 4th, 2013

Microsoft Corp.’s billion deal to acquire Nokia Corp.’s mobile-phone business turns the U.S. software giant into a stronger hardware vendor, but also complicates its relationship with Asian device makers such as Samsung Electronics Co.

For Asian handset makers, Microsoft’s decision to deepen its ties with Nokia—reminiscent of Google Inc.’s 2011 move to buy Motorola Mobility Inc.—is the latest reminder that their software partners are also potential competitors, and that could push some of them to work harder on their own software capabilities.

Nokia is by far the biggest supplier of handsets using the Windows Phone operating system, but Samsung, HTC Corp. and other Asian handset makers also sell some devices using Microsoft’s software.

“This acquisition creates a lot of uncertainty for hardware vendors working with Microsoft,” said Canalys analyst Rachel Lashford. While the deal could give Microsoft the ability to tap Nokia’s sales channels and launch Windows-based hardware products in a more timely manner, it could also put the U.S. firm’s relationship with hardware partners at risk, Ms. Lashford said.

Microsoft is acquiring nearly all of Nokia’s mobile business in a $7.18 billion deal. The WSJ’s Juro Osawa tells Ramy Inocencio what the purchase means for the tech world.

In an attempt to ease any concerns, Microsoft Chief Executive Steve Ballmer said in a conference call after the deal announcement that the U.S. company will remain committed to its hardware partners.

Microsoft is the biggest software partner for Asian PC makers such as Lenovo Group Ltd. and Acer Inc., but the U.S. company has little presence in the smartphone market. There are few major suppliers of handsets using Windows Phone other than Nokia, which uses the operating system in its Lumia phones.

Windows Phone accounted for only 4% of all smartphones shipped globally in the second quarter, according to research firm IDC, while Android accounted for 79% and Apple Inc.’s iOS took up 13%.

Microsoft already has a strategic business alliance with Nokia. Before the two firms teamed up in 2011, HTC used to be Microsoft’s closest hardware partner in the smartphone market. Now, most HTC handsets are powered by Android, and analysts estimate that about 10% of HTC’s smartphones are using Windows.

Samsung, the biggest vendor of Android-based devices, also sells some Windows-based products such as the ATIV line of tablet computers.

For Samsung, HTC and other major Asian handset vendors, the option of using Windows Phone could become even less attractive due to Microsoft’s deal with Nokia, said Nicolas Baratte, head of Asia technology research at CLSA.

“In the smartphone market, handset vendors don’t have any realistic alternatives to Android right now,” Mr. Baratte said.

Despite its acquisition of Motorola Mobility, Google has managed its relationship with handset vendors well. Google doesn’t charge them for the OS and makes money through mobile-based advertising and other services. For now, “Android doesn’t limit [handset makers'] ability to make money,” said Mr. Baratte.

Even so, Samsung has been working for years to find software options other than Android. The company has jointly developed the Tizen OS with chip maker Intel Corp., but it hasn’t yet announced any smartphone powered by Tizen.

In an interview with The Wall Street Journal earlier this year, Samsung mobile chief J.K. Shin said Samsung plans to release a Tizen-powered phone in the third quarter, but recent local media reports have said the launch may be delayed.

HTC, meanwhile, is developing a smartphone OS specifically for Chinese consumers, people familiar with the project told The Wall Street Journal last week.

In the long run, Microsoft’s deal with Nokia creates the need for Samsung and other major handset makers to work even harder on their own software, said Canalys’s Ms. Lashford. But creating an ecosystem of app developers has proved to be a huge challenge. Both Android and iOS have roughly one million apps each, created by numerous developers around the world.

Microsoft’s relationship with its computer hardware partners was strained when it chose to release its own Surface tablets last year. Following the Surface launch, Acer Chairman J.T. Wang criticized Microsoft for competing against the Taiwanese PC maker and other hardware partners and throwing the industry into uncertainty, even though he later dialed back his criticism.


Microsoft-Nokia: Hardware Is Dead. Software Is Dead, Too

September 4th, 2013

With Google Inc.’s GOOG +1.59% $12.5 billion purchase of Motorola MSI +0.48% Mobility and Microsoft Corp.’s MSFT -4.55% $7 billion purchase of Nokia Corp.’s NOK1V.HE +33.94% phone business, we are now inside a truly converged world, where distinctions between form and function have evaporated. Software is hardware. Hardware is software. Everything is everything.

BlackBerry BB.T +1.03% tried it before, though never on this scale. Today only two true mobile “ecosystems” have flourished: Apple Inc.’s AAPL +0.28% iOS and Google’s Android. We are now witnessing the collapse and reordering of the remnants, with Nokia, Microsoft, HTC and BlackBerry chief among them.

What happens next? Here are five things to consider:

1. Scale matters more than ever before.

Building mobile ecosystems are the massive industrial projects of our age—requiring synchronized engineering, programming, evangelization and marketing. Apple has been most adept at this task, but Google hasn’t been far behind, with a different approach of licensing its Android mobile operating system far and wide.

Scale in distribution obviously allows for these costs to be amortized across tens or hundreds of millions of units. This is why BlackBerry’s net margins turned negative after the launch of its new phone, and Apple’s net margins barely budged. (Interestingly, Nokia outspent Apple’s $4.2 billion research and development budget by $1.3 billion over the last 12 months.)

But what’s now required is a different kind of scale—a scale of skills. This means every company is trying to get better at another side of the business. Google gambled on a Motorola purchase to get better at hardware. Samsung has proved a masterful and profligate marketer, but still lacks its own software platform (more on this later). Apple has to refresh a software and services platform that has gotten stale.

Microsoft’s Nokia purchase is unique in that neither has proved adept at hardware nor software. Nokia’s smartphone market share has been in decline and is now at just 3% through the first half of 2013. What suggests that Microsoft can do better over time? Having just announced it was writing off $900 million on its heavily-promoted Surface tablet, Not much.

2. The coming Google-Samsung showdown

All of those factors get us to the real action in the smartphone market: The relationship between Google and Samsung. Right now the two are in a relatively peaceful détente, as each has helped build world-wide Android share to an impressive 79%. They need each other for now.

But for how long? Some clues surfaced in March, when Samsung showed off new handsets at New York’s Radio City Music Hall. There it made paltry mention of Google and Microsoft. The Samsung name was paramount.

Samsung is trying to create its own operating system with Intel, called Tizen, but it remains underdeveloped. Google’s purchase of Motorola at least gives it some measure of independence should Samsung split off in the years ahead. For now, though, Samsung lacks an alternative. Look for it to eventually build or buy its own—which would splinter the current ecosystem world into Apple, Google, Samsung, and the ragtag stragglers.

3. Competition is from the Eastern periphery. Not the Western core.

BlackBerry, Nokia, HTC. Just three years ago, each legitimate players with devoted customer bases, and each challengers to the Apple and Android ecosystems.

It is probably best to put these names aside when assessing the future of competition. BlackBerry is willing to sell itself for parts. HTC is in financial straits of its own, with sales down 22% from a year ago.

Instead, think of the following: Huawei Technologies Co., Lenovo Group Ltd., ZTE Corp, and China Wireless Technologies Ltd. 2369.HK 0.00% In fact, China-based Huawei had the world’s third-largest smartphone share at various points in 2012.

These companies are important largely because they are where the new smartphone buyers are: China. Despite massive growth, today less than half the country’s phone-using population goes online.

These firms have largely hitched themselves to Android, and will probably continue to do so. But two years from now, it may matter much more to the market what happens with Coolpad—a cheap offering from China Wireless, than the newest BlackBerry. And in that are the potential seeds to long-term competition to Apple and Google.

4. Developers lose leverage.

Unless Microsoft can develop a true alternative to Apple and Android, software developers will continue to lose leverage in the marketplace. Broadly speaking, each will have little choice but to commit to the two ascendant platforms. This will only enhance those platforms’ power—a matter of scale that Microsoft knows all too well from Windows.

5. The winner is the network.

Lost in today’s shuffle was the final announcement of Verizon Communications Inc.’s $130 billion buyout of the remainder of Verizon Wireless.

There’s a reason this number is so large. As these ecosystems get ever more advanced, the opportunity for serving more data gets equally enticing. The barriers to entry for building wireless networks also remain very high.

In a world where everything is everything, the distinctions between good hardware and good software won’t matter much to the middleman. Whatever happens to Microsoft, there will be more bits floating up and down these networks than we could possibly have dreamed of.


Nokia exec frustrated with pace of Windows Phone software updates

July 30th, 2013

Nokia’s (NYSE:NOK) top executive in charge of application development expressed what appeared to be frustration with partner Microsoft’s (NASDAQ:MSFT) slow pace of software innovation and updates for the Windows Phone platform.

The two companies are working as closely as ever, according to executives, but in an interview with the International Business Times, Bryan Biniak, Nokia’s vice president and general manager of app development, said Microsoft needs to do more to change how it approaches the mobile market.

Biniak noted that Nokia has been releasing Lumia Windows Phones at an increasingly rapid pace, and indeed, the company has announced at least 10 new smartphones in the past 12 months. “We are releasing new devices frequently and for every new device, if there is an app that somebody cares about that’s not there that’s a missed opportunity of a sale,” he said.

“We are trying to evolve the cultural thinking [at Microsoft] to say ‘time is of the essence,’” he said. “Waiting until the end of your fiscal year when you need to close your targets, doesn’t do us any good when I have phones to sell today.”

Biniak noted that Nokia has a responsibility to “reinforce the message” that Microsoft has to speed up when it comes to mobile in order to create a stronger platform and application catalogue.

A recent report from The Verge, citing unnamed sources, said Microsoft is working on the so-called Windows Phone Blue update, expected in early 2014–and rumors say the major upgrade will bring a notification center, enhanced multitasking and improvements to built-in applications, among other improvements. That timeline for a major update has sparked enthusiast frustration with Microsoft, which Joe Belfiore, Microsoft corporate vice president and manager for Windows Phone Program Management, responded to in an online plea for patience.

Windows Phone captured 4 percent of the U.S. smartphone market in the second quarter, according to new data from research firm Kantar Worldpanel ComTech, increasing from 2.9 percent in the year-ago quarter, while BlackBerry (NASDAQ:BBRY) plummeted from 4 percent to just 1.1 percent, indicating that its overhauled BlackBerry 10 OS is doing little to revive consumer enthusiasm for the platform.

Still, Biniak made it clear that more needs to be done to increase the number of apps in Microsoft’s app store (currently around 165,000), to catch up to Google’s (NASDAQ:GOOG) Android and Apple’s (NASDAQ:AAPL) iOS.

“To give you a reason to switch, I need to make sure the apps that you care about on your device are not only on our phones, but are better,” he said. “I also need to provide you unique experiences that you can’t get on your other devices.”

“People rely on applications for their day-to-day life and if you don’t have something which I use in my day-to-day life I’m not going to switch [operating systems] because I don’t want to compromise the way I live my life just to switch to a phone,” the Nokia executive added. “It’s not just about the hardware, it’s about the tools that are on the hardware. You can’t sell a phone without the apps, you just can’t.”

Despite those remarks, Biniak said he doesn’t believe there are any “major gaps” in the Windows Phone catalogue but admitted there are still “select applications that need to be there.”

In a separate interview with Engadget, Biniak said that major apps will arrive on Windows Phone sooner rather than later.


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