Lessons From Microsoft-Nokia Deal: Shove Your Core, Innovations Can Wait

Like it or not, Big Tech is struggling all over the world and global giants are not denying it either. There’s always the fear of becoming ‘obsolete’, but there are two simple ways to survive that fear psychosis. One is – invent or perish – a pet word of many a tech firm. And the other, I feel, is to stay relevant in your proven territory and still expand – as we have probably seen in the recent Microsoft-Nokia deal. Looking beyond one’s expertise calls for courage and innovation – something that the search giant Google is constantly trying to achieve. But being radically innovative should not be at the cost of the other success component, which means one must nurture and complement what one is best at.

One interesting observation can be Microsoft buying the Finnish mobile phone maker Nokia’s Devices and Services business, as well as its patents, for a total of 5.44 billion euros or $7.17 billion, not a mind-blowing amount, to say the least. But what’s the big deal there? They have been partners for some time now – Nokia being the first hardware manufacturer to integrate Windows Phone OS. So there is a business justice of sorts when the companies eventually tie the knot. It is going to benefit both as is apparent from the deal – Microsoft gets a 10-year non-exclusive licence to Nokia’s patents while the handset maker can access deep pockets and will essentially focus on network infrastructure and services, which it calls “the best path forward for Nokia and its shareholders.”

Many would like to call it a marriage of convenience and more beneficial for Nokia, keeping in mind its recent downturn. Nokia has not only lost to biggest competitions like Apple and Samsung, but also to India’s home-grown mobile makers like Micromax, Karbonn and more. But at this point, one cannot overlook some unsavoury truths plaguing Microsoft, the once almighty software giant. Speculations are rife that MS took this initiative as it doesn’t want to repeat the blunder it has made with its struggling line of Surface tablets.

From Day I, Microsoft has been threatened with a big screen iPad (around 13 inch, going by the rumour mills, while the current one measures 9.7 inches), which could be a bridge between a traditional iPad and a more expensive MacBook Air. If such a device pops up, along with a wireless keyboard, it will be more than a match for the Surface line of RT-based and Windows 8-based Surface tablets.

But that’s not because Microsoft has delivered less in terms of offering. While experts are free to do a hair-splitting comparison, it will ultimately boil down to buyer loyalty, based on niche expertise. In spite of its hardware (mis) adventures, Microsoft is still esteemed as the software king while Apple and Samsung clash head on for the biggest chunk of loyalty pie in the hardware market. It, therefore, makes eminent sense that Microsoft could be easily thrown overboard when its ‘betters’ take the centre stage. It also makes sense that the company should keep its software forte invincible and tie up with a manufacturer that enjoys as much credibility in its own field.

And that’s where Nokia comes in. In spite of its market dominance for more than a decade, the Finnish firm has been in a different space altogether, not to be compared with Apple or Samsung. Those two are the ultimate tech icons (and Apple still holds an edge over the Korean giant for being radically innovative) while Nokia (in spite of Lumia, 808 PureView and a few more hi-tech models) has been more engaging as an everyday utility gadget. Not an extremely aspirational brand maybe, but it still had a solid fan-following till recently.

That, indeed, should be a point of comfort for Microsoft. Even now, Nokia enjoys some solid reputation as an original equipment maker, especially in the emerging markets, while Windows Phone OS posted the largest growth among the top five smartphone platform shipments in the second quarter this year, surpassing the struggling BlackBerry, which dropped to the fourth spot. “Windows Phone posted the largest year-over-year increase among the top five smartphone platforms and in the process, reinforced its position as the No. 3 smartphone operating system,” IDC said in a release.

It is, therefore, quite likely that the Microsoft-Nokia deal will once again trigger an intriguing three-pronged fight for the market share and create some innovative magic in the process. After all, the priorities are not confused this time – Microsoft is not getting into handset manufacturing to promote its mobile OS and is pretty much doing the same thing that Google did with Motorola. But here's a catch. In spite of firing the Android OS to the top, the search giant and innovation hardliner has apparently failed to make good its $12.4 billion acquisition of Moto. Will the Microsoft-Nokia dream also die hard and fast?