Although Microsoft has talked about becoming an Apple-like “devices and services” company for nearly a year, the acquisition of Nokia’s device-and-service arms puts those plans on the fast track.
My colleague Harry McCracken pointed out last night that Nokia sells nearly 87% of all Windows Phones, and that number seems likely to grow. By purchasing Nokia, Microsoft will gain near-complete control over Windows Phone hardware, not just the software.
For smartphones, this is as close to Apple’s approach as it gets. Apple is famous for its tight integration of hardware and software, which generates lots of satisfied customers as well as huge profits.
But as Michael Mace notes, the Apple approach rarely works well for other companies:
Other than Apple, how many integrated hardware-software companies have succeeded wildly in mobile? Let’s see, there’s Palm, BlackBerry, Danger … Apple starts to look like the exception rather than the rule. I start to think the real lesson is that no strategy will work if you execute it poorly.
It’s a great point. Not long ago, integrated hardware and software seemed like the way to go in mobile. HP acquired Palm in 2010 in hopes of turning WebOS into a major computing platform. That same year, BlackBerry announced the first tablet based on its QNX operating system, and it looked promising. Google also worked closely with a handful of phonemakers on Nexus devices around that time, and in 2011 announced that it was buying its own handsetmaker, Motorola.
A few years later, there’s no evidence that the Apple strategy makes sense for anyone but Apple. BlackBerry hasn’t released a hit product in years and is now looking for a buyer or partner. Internal chaos at HP helped destroy WebOS in 2011. The only successful Nexus devices are the ones that sell for dirt cheap. Motorola is showing renewed spark, but has a long way to go if it wants to become a top Android phonemaker.
Meanwhile, some of the most successful non-Apple hardwaremakers are the ones that haven’t aped the Cupertino business model. Samsung has made a killing in smartphones without collaborating too closely with Google, instead cobbling its own features onto the Android operating system. Lenovo’s profits are soaring through a combination of growing Windows PC sales and explosive Android device sales in China. (As an aside, Google makes more money from iOS than from Android devices that are better integrated with Google services.)
For Microsoft, the potential upside of acquiring Nokia is great, but so are the risks. The U.S. company is in the middle of a massive reorganization and is looking for a new CEO, with Steve Ballmer planning to retire within a year. It’s not hard to imagine Microsoft’s internal struggles wreaking havoc on Nokia and Windows Phone, just as HP’s problems caused WebOS to implode.
The one reason I’m slightly optimistic is that Nokia seems to understand how to make Windows Phone better. The company has done a lot of its own legwork to bring more big-name apps to Windows Phone, and the vice president in charge of these efforts, Bryan Biniak, hasn’t been afraid to criticize Microsoft either. Speaking to the International Business Times in July, Biniak suggested that Microsoft needed to move faster on updating Windows Phone. “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.”
Nokia might have a better shot at changing Microsoft’s culture from the inside, but I’m guessing it won’t be easy. Becoming an Apple-like company never is.