Microsoft completes Nokia acquisition: what now for Windows Phone?

Microsoft has completed its acquisition of Nokia today, a milestone in the turbulent story both of Nokia and of Windows Phone, which Nokia adopted in the hope of establishing a “third ecosystem” to challenge Apple iOS and Google Android.

Rumour has it that the Nokia acquisition was controversial within Microsoft and a large factor in the departure of Steve Ballmer as CEO. However, even if Microsoft took the view that an independent Nokia was better for Windows Phone, it faced the risk that market pressure would drive Nokia to Android and weaken the platform. The beginnings of that process may have been under way, with the launch of the Nokia X Android-but-not-Google range of phones, but we will never know, since Microsoft decided on acquisition.

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How important has Nokia been for Windows Phone? In my view, life-saving. Before Nokia, there was no manufacturer nor operator which really cared about the platform, and it showed in lacklustre hardware and half-hearted marketing efforts. Nokia came up with the distinctive Lumia brand and style, added a decent mapping service, and with its focus on the PureView camera technology, gave enthusiasts a reason to take a close look at its devices. It also saw an opportunity at the low end, and created some great value devices that opened up a new market for the operating system.

There were some blunders (the original Lumia 800 suffered many faults and terrible battery life on launch) and Lumia did not grow fast enough to restore Nokia to health, but to my mind it was a good effort.

Today, the general opinion of Windows Phone is that it is a strong smartphone operating system but suffers from a lack of high-quality apps. Users have to put up with the fact that most app vendors feel they are done if they support iOS and Android; and if there is a Windows Phone version of their app, it is often poor. That is not a great position for Microsoft/Nokia to be in, but it could be worse. Blackberry 10, which is also a decent mobile operating system, has been all-but written off as a viable contender.

Microsoft is fortunate in that, unlike Blackberry, it can to some extent create its own ecosystem. Office 365, Bing, OneDrive, Nokia’s maps, Azure for developers needing a cloud back-end: taken together they form a viable alternative. In this respect, Microsoft actually has an advantage over Apple, which lacks this breadth of services.

I have been reading the latest Developer Economics report from Vision Mobile. It is a good example of the neutral perspective on Windows Phone, though you will find it somewhat inconsistent:

Windows Phone sales picked up significantly in Q3 2013, showing a 140% increase year-on-year, fuelled primarily by low-end device sales. According to Kantar, Windows Phone sales in the three months running to Oct 2013, reached double-digit figures in some Western European markets. While this is certainly a positive sign for Microsoft they will continue facing an uphill struggle, in an increasingly unfavourable race against the two runaway leaders, iOS and Android.

The report emphasises that iOS and Android have won the mobile OS wars, but says that there are signs of hope for Microsoft:

Windows Phone Developer Mindshare has finally moved upwards, following positive market signals in the last two quarters. As we have frequently highlighted in past reports, the developer intent has always been there, with Windows Phone figuring at the top of our Developer Intentshare chart, but needed positive market signs in order to convert this interest into Mindshare. While the 26% Developer Mindshare is still less than half of that for iOS, Microsoft can now claim that over a quarter of developers that target mobile platforms are now actively developing for Windows Phone. […]

As a latecomer to a mobile market dominated by strong network effects, establishing a credible footprint in mobile remains a formidable challenge

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