Nokia Makes Last Stand With Microsoft

During the announcement of this deal, Elop was quoted as saying that the smartphone market is a "three-horse race" (Apple, Google, and Microsoft), and that part is mostly true if you assume RIM is on the way down. The problem for Nokia is that Microsoft's horse just arrived at the track and the other two horses are already out of the gate. Google's Android has already proven itself in the market, so it would appear to have been a safer bet to go with Android. The problem with Elop's analogy, of course, is that in this race there is no finish line. If there were, his choice would be irresponsible given the competition's head start. Instead, it's merely a perilous Hail Mary attempt. Sometimes those plays can work.

There are several reasons why Elop may have decided to go with Microsoft, skipping the comparatively safe choice of Android. Perhaps it was the fact that Elop was formerly a Microsoftie, so his roots with the company (and perhaps a dislike of Google) may have affected the decision. Some point to the fact that Elop still owns a lot of Microsoft stock, valued at more than $3 million currently. No doubt these issues may have swayed the decision, but I don't think they would have stopped Elop from going with Android if all other factors were equal.

I think the biggest reason why Elop chose Microsoft was to salvage Nokia's corporate pride. Realistically, Nokia couldn't continue to shoulder the burden of supporting so many software platforms for its phones. The company had a choice between Google and Microsoft, and it's not like going with Android was going to save any of Nokia's expensive projects or prevent its software staff from getting the boot. However, if Nokia does succeed with the Windows Phone strategy, the company can legitimately claim to have been an important part of Microsoft's success in the mobile market. Plus, Microsoft is essentially willing to fund Nokia's transition.

A lot of these benefits in costs savings assume Nokia doesn't lose its nerve or meet too much resistance from its employees, former partners, or governments. Late last year the European Union contributed $31 million to the Symbian project, calling it "a vital focus for European-centric software development." Does Nokia have any restrictions in phasing out its Symbian involvement as a result? Nokia is turning its back on their existing developer infrastructure, which included Meego, Symbian, and the Qt developer framework. Anyone that hitched their company's wagon to that is going to be livid. How quickly can Nokia disengage from those projects without damaging its reputation?

Regardless, the new Windows Phone strategy marks the beginning of a do-or-die moment for Nokia's survival in the smartphone market. Windows Phone needs to succeed in Nokia's European stronghold for the both companies to see quick success. There isn't a way to hedge this bet, at least now that Elop has made it clear that the previous platforms like Symbian and Meego are history. If Windows Phone fails for Nokia they would have only one viable choice, and that is to start all over again with Android.

Perhaps even that last-chance bridge to Google is burned now. Vic Gundotra, a fifteen-year veteran of Microsoft who is now VP of Engineering at Google, tweeted a comment that Nokia CEO Steven Elop made a few years ago when commenting on another industry merger: "Two turkeys don't make an eagle." Elop replied, "Two bicycle makers from Dayton Ohio, one day decided to fly." If that is the analogy Microsoft and Nokia want to use, my advice to them both would be to pedal really hard.