Microsoft and Nokia Join Forces to Fight “Separate Wars”
Microsoft and Nokia have teamed-up to offer Microsoft Office software on Nokia’s E-series phones, and eventually on other handsets, starting in 2010. Technically, both compete in the smartphone market with their separate operating systems for mobile devices. Microsoft has its Windows Mobile platform, while Nokia has its Symbian sytems. So why join forces now? Because both are using the move to defend their lead on different fronts.
Nokia’s fight: smartphone dominance. "This is really about creating a formidable challenge for RIM," said Nokia EVP for Devices Kai Öistämö at the official press conference. He’s referring to BlackBerry-maker Research in Motion, which holds 18.7 percent of the smartphone market, according to technology research firm Gartner.
While that’s less than Nokia’s 45 percent market share, the BlackBerry is seen as being favored by businesses, largely due to its emailing and productivity features. In fact, a recent survey of 300 high-end users by investment firm Goldman Sachs (as reported by tech publication ZDNet) found that 57 percent of respondents owned BlackBerries. Of those, 32 percent were subsidized by their companies. By offering Office software on its phones, Nokia hopes to appeal to more business users.
RIM, however, is not the only challenger to Nokia. Gartner also reports that iPhone 3G S sales are a big factor. iPhone sales were the most impressive out of all the smartphones launched in the 2nd quarter of 2009, including Nokia’s N97. It also says Apple had the biggest market share growth in the past year, from 2.8 to 13.3 percent.
Some industry analysts attribute this success to the iPhone App Store, among other factors (see our previous post on App Stores). Indeed, telecoms analyst firm Juniper Research predicts mobile app downloads will approach almost 20 billion per year by 2014. To compete, Nokia launched its own app store, the Ovi Store, in May. The store’s selection, however, is still sparse. The addition of Office software could give Nokia phones the boost it needs among users seeking productivity apps. BlackBerry too has launched its own App Store.
Microsoft’s fight: dominance in communications software. Microsoft Business Division President Stephen Elop says the partnership is part of a strategy to “provide the best productivity experience across the PC, phone and browser.”
Microsoft’s Business Division, which includes Office, has recently reported declining revenues. As Office is a top moneymaker for the company after Windows OS, a lot rides on its continued success. Office, however, faces increased heat from competitors like Google’s free, Web-based productivity apps. “Google's initiative is forcing Microsoft to change its business model,” said Sandeep Aggerwal of the financial advisory group Collins Stewart, in a Dow Jones Newswire interview.
Indeed, Microsoft appears to be covering its bases while it can. Back in July, the company also announced plans to launch free Office Web apps in 2010. Gene Munster, analyst at investment firm Piper Jaffray, thinks it’s a wise move. In an interview with The Wall Street Journal, Munster says making sure people are still using Microsoft products is more important in the short term than risking revenue.
