Is Nokia-Microsoft Alliance In Trouble?

Nokia's smartphone business is in crisis. What does this mean? More than anything else it means that customers are dropping their old platforms, principally Symbian, like a red-hot stove. Does it mean the Nokia-Microsoft alliance for Windows Phone is a failure? It's way too early to say that.

But it is a crisis. You have to ask whether Nokia can survive long enough to establish a solid market for Windows Phones. It won't be pretty, but I think it can. In the phone market it's all it has left, so it really does need to throw everyone else overboard. This it seems to be doing with a series of massive layoffs. The Wall Street Journal says that the company is designed to be really big and the loss of market share means it has to redesign itself.

InformationWeek's Eric Zeman says that Nokia risks technical marginalization and might join the ranks of Palm and RIM. Click here for his take.

In the meantime it will try to recover with unspecified help from Microsoft. This might be an issue in this coming Wednesday's Windows Phone Summit, where reports (and common sense) say Microsoft will discuss Windows Phone 8, the next version of the OS.

There's potential for a problem with the Wednesday event: the Osborne effect. As you might recall, the Osborne Effect is what can happen to a company when it makes an early announcement of its next-generation product: customers stop buying its current product. The dynamic is what helped kill Osborne Computers in the early 80's.

Windows Phone 8 already has been reported as being the first version based on a partial common code base with the desktop Windows. The advantages of this to users are a bit unclear, and it might even give buyers pause, especially when current Windows Phones, including the only really hot one on the market, the Nokia Lumia 900, won't be upgradable to Windows Phone 8.

Nokia might already have Osborned itself in this market some, according to the Wall Street Journal article. It cites depressing sales numbers from the first quarter, but the well-received Lumia 900 was demonstrated in January and not released until April. I know I wouldn't have bought a different, lesser Nokia phone after that announcement.

I still want a Windows Phone. I love the interface and I really don't like my iPhone's. But if I were to buy a Windows Phone now, I wouldn't buy it on a long-term contract.