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9/3/2013
10:32 AM
Michael Endler
Michael Endler
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Microsoft's Nokia Buy: Consumer Chase Is On

Microsoft can't live by enterprise dollars alone. By purchasing Nokia's device business, Microsoft has shown its consumer strategy will survive into the post-Ballmer era.

And though some investors question Microsoft's consumer emphasis, others see potential. Richard Cook, whose capital management firm owns Microsoft shares, is one example. He told Bloomberg that the "genius" of the Xbox is that it allows the company "to put a Microsoft machine in everybody's living room."

But the question remains: If Microsoft is dedicated to chasing consumers, how will the company reverse its recent misfortune?

If Nokia's reported plan to launch a Windows RT 8.1 tablet at the end of September is any indication, Microsoft's purchase won't turn the tide on its own. Allegedly codenamed Sirius, the device is expected to boast competitive specs and components, but its core differentiation is still essentially the same as the disastrous Surface RT's: Sirius will be a laptop-like tablet. That tactic didn't work the first time, and it's hard to see consumers caring about Windows RT 8.1's additions, such as Outlook access and more extensive UI customization. Sirius' alleged $499 base price certainly won't help -- not with a new, identically priced iPad expected to hit the market around the same time. Sirius should be better than the Surface RT in every way, and it might sell better. But, is incremental progress enough to justify the "one Microsoft" vision?

Consumers aren't the only market for such a device, of course. An ultra-mobile device that supports Microsoft Word and Outlook might be attractive to schools and businesses, too. Some commercial customers have already embraced Windows 8 and Windows RT for their tablet-PC convergence, and the updates should attract new customers. But Forrester analyst David Johnson said enterprise customers still aren't interested in Windows 8.1. So again: How much growth will be enough?

The Nokia purchase supports that Stephen Elop, the company's CEO, is a leading contender for Steve Ballmer's job. But his appeal is predicated on advancing the course Ballmer has laid out. It's possible Microsoft devices will continue to progress slowly, and that enterprises will continue to resist Windows 8 and its consumerized UI. If these scenarios play out, the next CEO, whether Elop or someone else, might be forced to tweak aspects of the "one Microsoft" game plan.

Hoping to boost adoption of its own hardware, Microsoft has withheld Microsoft Office from iOS and Android, for example. The tactic hasn't worked and, though it might modestly boost enterprise sales as Windows XP winds down, the aforementioned Gartner study suggests iPads will nonetheless continue flooding into the workplace.

Steve Jobs once famously said, "If you don't cannibalize yourself, someone else will," and Microsoft should heed this advice. Microsoft won't win consumers by holding features hostage; it will win by delivering a product that people want to use -- and with Nokia's resources now in the fold, Microsoft has shown a willingness to gain the resources to do so. Now it has to execute.

Learn more about enterprise mobility and BYOD by attending the Interop conference track on Mobility in New York from Sept. 30 to Oct. 4.

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cbabcock
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cbabcock,
User Rank: Strategist
9/4/2013 | 11:25:18 PM
re: Microsoft's Nokia Buy: Consumer Chase Is On
It's true Microsoft is trying to preserve a hardware partner on the brink of failure, but that partner produces consumer mobile devices. There' s no point in making this move if you're in a headlong chase after consumers. But your effort places you in the back of the pack.
WKash
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WKash,
User Rank: Author
9/4/2013 | 8:32:10 PM
re: Microsoft's Nokia Buy: Consumer Chase Is On
Another way at looking at this is that Microsoft's decision to buy Nokia's smartphone business and patents was as much about preserving a crucial, dedicated hardware partner as it is about getting more squarely in the consumer game.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
9/3/2013 | 8:39:05 PM
re: Microsoft's Nokia Buy: Consumer Chase Is On
Microsoft seems to be trying to run its own game using Apple's playbook and it's far from clear that it can do so. There are not many other examples of successful hardware/software companies. BlackBerry comes to mind as an example of what not to do. Apple seems to be more the exception than the rule, so I doubt that Microsoft will prosper with Nokia's baggage.
cbabcock
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cbabcock,
User Rank: Strategist
9/3/2013 | 6:08:41 PM
re: Microsoft's Nokia Buy: Consumer Chase Is On
Excellent analysis here. Microsoft believes it must be a consumer company and is on a mission, I guess, to prove that one massive consumer hit, Windows, guarantees another. It ain't necessarily so. Microsoft first gained the consumer market by producing good consumer software, then using agreements with PC manufacturers to place its operating system -- and not anyone else's -- on new PCs. It could reward manufacturers with a price advantage if they did; punish, if they didn't. This control point no longer exists. You have to win consumers by appealing to consumers. In that sense, Steve Jobs took this direct route much more effectively than Microsoft ever did, Microsoft's DNA is more strongly as a software development company than as a company with consumer insight. It's now set out to prove that it has the insight, as well as the development smarts. I'm holding my breath.
rradina
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rradina,
User Rank: Ninja
9/3/2013 | 6:00:16 PM
re: Microsoft's Nokia Buy: Consumer Chase Is On
If it's based on Intel and it's running Pro, it could be a reasonable option in an already-crowded field. If it has an ARM chip and RT, the price is wrong. Competitors already offer a full Windows laptop-like tablet at that price point. Buying an RT device seems like less for the same price. Of course Microsoft has confused the market with it's ARM vs. Intel and touch vs. classic strategies that it's hard to tell what the public thinks of any of this.
Laurianne
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Laurianne,
User Rank: Author
9/3/2013 | 5:50:41 PM
re: Microsoft's Nokia Buy: Consumer Chase Is On
A $499 laptop-like tablet from Nokia in late Sept.? This surprises me that they would not learn from the reaction to Surface RT hardware.
Lorna Garey
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Lorna Garey,
User Rank: Author
9/3/2013 | 5:19:54 PM
re: Microsoft's Nokia Buy: Consumer Chase Is On
Seems like the draw of Nokia should be its patent portfolio, yet the deal only brings a 10 year license. I don't get the logic of that for MS.
DDURBIN1
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DDURBIN1,
User Rank: Ninja
9/3/2013 | 5:16:59 PM
re: Microsoft's Nokia Buy: Consumer Chase Is On
Acquiring Nokia doesn't give Microsoft resources to success. Microsoft has all the resources it needs at it's disposal. What Microsoft needs is better management and decision making at the top as current product features and pricing are designed to maximize the most profit not to satisfy the most consumers.
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