Monday, February 17, 2014

What Has Microsoft Bought With Nokia?

New Microsoft CEO Satya Nadella has told his employees that the future will be in software, mobile and the cloud. With the Nokia acquisition on track to close at the end of March, it just seems less and less clear how Microsoft's mobile future will be helped by the acquisition of Nokia's device business, to the tune of $7.2 billion.

I've been doing a lot of reading on choice, starting with classics like Kahneman and Tversky to a Barry Schwartz's "The Paradox of Choice." (the link is to his TED talk, not to his book).  Nowhere does consumer sovereignty weigh more heavily on our choices than it does in personal technology, like smart phones.

Schwartz writes, "But as the number of choices keeps growing, negative aspects of having a multitude of options begin to appear. As the number of choice grow further, the negatives escalate until we become overloaded.  At this point, choice no longer liberates, but debilitates.  It might even be said to tyrannize."

We are there in the world of smart phones.  I've listened in on many interactions between retail customers and store associates as the consumer, with their kid in tow, asks "I want to buy Jane the best smart phone. You know, for school and because she'll definitely need one in college.  Can you help me?"  I've also read, viewed, and heard many of today's tech gurus for CNet, the Wall Street Journal, Money, PC Magazine, and Consumer Reports all hold forth on how to make this decision.

Out of all this confusion, it is very hard to see how Microsoft can be saved from once again being late to the party, for having launched Windows Phone 7 with a thud before eventually designing a decent product around Windows Phone 8, and then for launching Nokia Windows 8 phone but failing to leave the atmosphere.

Here on Presidents Day with the big sales, I find the Nokia Lumia 520 and 521 unlocked for $69 and $59 respectively. These are on the Microsoft Store. These are about the cheapest smart phones a bargain hunter can buy.  They get decent reviews from those kinds of consumers who also acknowledge the limitations, particularly the small Microsoft Apps store.  But now, who would buy one with the clear risk that they could soon be orphaned by possibly abandoning the Lumia line and design.  (Leave aside the issue of abandoning Windows Phone 8, which would be too risky because it would end the "one experience across all devices" mantra.)  The higher end Lumia phones get good reviews for the cameras, but they don't really shine in other areas, and their battery lives are less than the bargain basement phones.

For Google to exit making devices showed, in my opinion, a lack of courage, but it was cynically pragmatic given Google's goal to bring tens of millions of new people peering into their devices and seeing Google Search and other services. Let others mess around losing money making devices.

Microsoft too, under Steve Ballmer, has said "it's all about services," but the current Nokia platform is poorly positioned to garner anything more than the current 2-3% of all handset sales.  At this level, it's not worth developers' time to build apps for Windows Phone 8 and so how does the store grow?  More time will be lost.  In the meantime, consumers are faced with replacing or adding smart phones to their family plans. What to do?

The Wire Cutter, a highly regarded tech consumer products site, rates the Apple iPhone as their Favorite Smart Phone, with Motorola's Moto X as the best Android Phone. But now, with the sale of Motorola Mobility to Lenovo, consumers who opt for Moto X may, like Lumia buyers, see their phones marginalized or quickly obsoleted.  Now Moto X owners will no longer be assured automatic updates to the latest version of Android, and they may now get versions with Lenovo's front end piled on top which may diminish the user experience that the Wire Cutter likes.  Do you think the carriers might consider returns or clearing out the Moto line's early products?

The consumer decision paradigm for an Android phone is way too complicated, and the risks of dissatisfaction are high: none of these states are where consumers like to find themselves after spending $400-500+ for a cell phone, call it what you will.

When the Nokia deal goes through I will be curious to read the level of charges taken for workforce reductions in Finland and for the allocation of the purchase price to intangibles and to goodwill.  That will tell a lot about this story will work, or not, in the future.

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