Search results for: “microsoft”

  • Microsoft in Yahoo! saga

    Microsoft in Yahoo! saga

    Re/code has an interesting article on how the Microsoft in Yahoo! saga continues to influence the sell off of Yahoo! assets by investing money in whichever bid coalition wins. This feels like a riff on Yahoo!’s history over the past six years.

    Careful balancing act for Microsoft

    The 2010 aggressive bid for Yahoo! was one of the factors in the departure of Steve Ballmer as CEO. A Microsoft-owned Yahoo! made almost as little financial sense as the Nokia handset acquisition.

    A later deal via active investor Carl Icahn gave Microsoft everything it wanted. Access to Yahoo! search inventory with no upfront payments. Under the Microsoft deal Yahoo! lost search market share and ad money. Microsoft’s AdCenter was not able to monetise Yahoo!’s search traffic as well as Yahoo! did. Search used to be responsible for half of Yahoo!’s revenue.

    Whilst Yahoo! now represents a smaller proportion of search traffic it is still lucrative for Microsoft. Microsoft’s advances in cloud services are still not as lucrative as search advertising.

    Microsoft will want to defend a position that on a rational analysis shouldn’t last. By loaning money, it gains leverage over a new management team.

    Cheap money to structure deal would be attractive for private equity groups. But it will be bad for the management team put in place and Yahoo!’s future prospects. The Microsoft in Yahoo! saga was at best a spoiling move.

    All just a little bit of history repeating

    Microsoft provided financial support for Icahn’s run at Yahoo! which saw the departure of Jerry Yang – and the sale of his position in the company. At the time of his overthrow, Yang was the largest single shareholder in Yahoo!.

    Six years later we can all see how successful that was.

    Problems that it won’t solve

    Yahoo! morale. There will be a right-sizing of  the workforce, private equity will be ill-prepared to retain the talent required to maintain and evolve Yahoo!’s services. They will also find it impossible to bring in talent in key areas (beyond senior executives). Yahoo!’s former chief product offer Blake Irving is a case in point of this. Expect Facebook, Amazon, Google and others hoover up the key technical talent Yahoo! needs to retain.

    Yahoo!’s international business seems to be a point-of-failure. Yahoo! has withdrawn from markets, particularly in Asia where market conditions should be much better. It has wound up businesses that it had recently acquired in the Middle East. Yahoo! Europe seems to have gone from bad-to-worse.  Expect Yahoo! to shutter more businesses and consolidate its business in North America.

    A highly leveraged Yahoo! still won’t have a mobile advertising solution beyond Flurry. Yahoo!’s own mobile apps consistently under-perform in app marketplaces. The mobile talent Yahoo! has gained will head for the door.

    Yahoo! still won’t work out how to sell millennial advertising. Tumblr is a good property, yet Yahoo! can currently monetise 15 per cent of advertising inventory on the platform. How will private equity solve this? Or will someone else pick it up at a fire sale? Microsoft is likely to try and stop any sale to Google (which would be a natural home).

    Yahoo! still won’t have an effective play in social platforms. Flickr will still be a niche rather than mainstream product.

    A key goal for Microsoft would be to obtain search traffic from Yahoo! Japan. Since Yahoo! Japan is a joint venture with SoftBank, this won’t happen. Yahoo! Japan has already gone to court to keep Microsoft out of its business. The new relationship with a divested core won’t change this.

    Getting Yahoo! on Microsoft’s cloud would be a major coup, but would require major coding, something that private equity owners probably wouldn’t want to do.

    Yahoo!’s IP including core patents for paid search offer little opportunity for additional revenue. They can’t be used against Google and would be unattractive to sell on. Yahoo!’s contributions to open source software would be missed – PHP, Hadoop and the Debian distribution of Linux have all benefited.

    History as an indicator of failure

    This would represent the second activist shareholder owned board. The current one has been responsible for a catastrophic destruction of value. None of the acquirers have articulated a reason why advertisers should believe in them. Whilst a deal needs to maximise value for Yahoo! shareholders; if it doesn’t offer a plan that pleases customers – it will fail.

    A highly leveraged business will not be in a good place to cope with programmatic advertising which will likely reduce the cost of Yahoo!’s over-priced display ad inventory. The likely leverage also means that Yahoo! would make an unattractive long term partner for the major marketing groups. More on Yahoo! here.

    More information
    Microsoft Tells Possible Yahoo Buyers It Would Consider Backing Bids | Re/code
    Yahoo! – how did we get here? | renaissance chambara
    Reflecting on Yahoo!’s Q2 2015 progress report on product prioritisation | renaissance chambara
    Facebook: the Yahoo! patents case | renaissance chambara
    Why I am sunsetting Yahoo! | renaissance chambara
    The trouble with Yahoo!’s M&A scuttlebutt | renaissance chambara
    Thoughts on the Microsoft and Yahoo! search deal | renaissance chambara
    Yahoo! Japan and The Gordian Knot | renaissance chambara
    Yahoo!: some things I am worried about | renaissance chambara
    Barbarians in the valley | renaissance chambara
    The Steve Ballmer Post | renaissance chambara
    The Wall Street Journal Online bounced my comment | renaissance chambara
    A quick primer re @blakei @yahoo #delicious | renaissance chambara
    2010 MICROSOFT BID FOR YAHOO | NY TIMES

  • Microsoft Office + more news

    Google hunts down Microsoft Office | Techeye – Google’s move is a big one but indicative of how desperate Google needs to diversity from its current online ad based model into subscription software (like Microsoft Office 365)for the enterprise

    Google and Yahoo sign search partnership – San Jose Mercury News – interesting because Yahoo! gets around the antitrust hobson’s choice it had with Microsoft and works with someone who can monetise half their search traffic better

    Yum Brands to spin off China business after activist investor named to the board | SCMP – whilst they have had problems in China, it is still over half their revenues (paywall)

    8 Things About WhatsApp You Should Consider Before Signing Up | Makesuseof – quite damning

    Yahoo and Google strike a search deal—if the Department of Justice says it’s OK | Quartz – this is huge for Yahoo!

    Tommy Hilfiger Introduces Virtual Reality Headsets for Shoppers – The New York Times – to showcase Autumn and Winter range (paywall) – more on VR here.

    Popcorn Time Download Not Needed, New Browser App Even Better | BGR – interesting hybrid of streaming and bittorrent

    Socialbakers Launches Advanced Native Analytics on Weibo | Socialbakers – interesting given that the data has to stay in China

    A Brand New Sysomos MAP And More Updates | Sysomos Blog – really nice interface changes

    Deutsche Telekom Said to Weigh New Antitrust Complaint Against Google – The New York Times – interesting that T-Mobile has stepped in on this given their pioneer status with the first Android handsets

    New Arduinos will be shipping soon with Intel’s Curie chip inside | ExtremeTech – this is about getting back into product prototypes and building a skill set ecosystem in the technology community

    Amazon PR Boss Blasts New York Times Exposé, Digs Up Dirt on Its Sources (Update) | Re/code – Amazon goes all Frank X. Shaw on the New York Times

    Pioneer Joins High-Resolution Audio Player Market – smartphones not cutting it

    CONSUMER: Wal-Mart, Suntory Struggle in China; Bright Shops in NZ – bottom line: Declining Wal-Mart China sales and Suntory’s decision to dissolve a China joint venture reflect difficulties foreign consumer names face in the fast changing market

    GPS and electronic payment: Hong Kong taxi industry insiders have big ideas for government review in wake of Uber crackdown – a cab drivers’ representative is calling on the government to review how taxi licences are issued and traded as the city’s transport chief plans to overhaul local taxi and car-hire services (paywall)

    The new favorite sport of wealthy teens: Soccer – data via Piper Jaffray

    The China Context | Alibaba Group – some great datapoints for presentations

  • Microsoft Windows event

    I’ve been in-and-out of meetings that prevented me from reflecting fully on the Microsoft Windows 10 event of October 7, 2015. Microsoft put a lot of content out there which is worthwhile picking through. I have put these items in the order that they occur to me rather than an order of importance.
    Windows 10 : Everything You Need To Know About

    Microsoft Windows 10 is designed to run on a wide range of devices, a by-product of this is that the PC on your desk maybe a phone connected to a screen and keyboard. Now this may not work for all applications, but it could be enough for browser-based needs. It also means that bring-your-own-device could move beyond having your email on your phone.

    The Surface Pro 4

    Whilst Microsoft has undergone a regime change since the launch of the original Surface, somethings haven’t changed. I think that the Surface Pro 4 represents a continued effort to decapitate the Microsoft PC eco-system. The targets in the frame are devices like:

    • Lenovo La Vie Z
    • Lenovo Yoga 3 Pro
    • H-P Spectre 13x 360
    • Dell XPS 13

    All of these devices broadly fit into the 13 ultra notebook format that Apple plays in, but I think that the goal is to maximise Microsoft’s revenue share of the Windows eco-system. The hardware design hasn’t done the wider Microsoft brand any harm at all.

    New Lumia devices

    The 950 and 950XL put Microsoft in the game, at least from a hardware perspective with the Android eco-system, comparing favourably on hardware specifications with the likes of Huawei, LG and Samsung. What I found more interesting is the allusion in Microsoft’s own commentary of the event that the phones would face a gradual rollout in markets and Microsoft wouldn’t be rolling it out to all markets in Europe.  Don’t necessarily expect to see these handsets being rolled out in multi-national companies without an extensive availability and support network.

    Whilst mobile network providers would like a third eco-system to reduce the power of Android and iPhone, there doesn’t seem to have been universal carrier acceptance of the devices. This maybe partly due to the tighter integration of Skype in the Windows 10 OS?

    Xbox on Windows 10

    Xbox need to bring more customers on board and having backwards compatibility with Xbox 360 games provides a more cost effective gaming experience thanks to eBay and other used console game exchanges. It also does beg the question about possible non-gaming or even enterprise use that could be made of the new Xbox (beyond running Linux on them).

    Rolling out an OS so universal as Windows 10 is an interesting move. It presents some risks:

    • Compromised user experience due to different user contexts (gaming, business desktop computing, consumer PC usage, tablet experiences). A touch orientated interface on a laptop is sub-optimal for content creators who can touch type for example
    • Bloat due to the ‘Swiss Army knife’ requirements catering at a core level for different form factors and displays

    More information
    The Secret of iOS 7 | I, Cringely
    Final 2014 prediction: the end of the PC as we knew it | I, Cringely
    Thoughts on Microsoft Surface | renaissance chambara
    Skype in Windows 10 Preview: Built into Windows 10 so you can do more with friends across devices | Big Blog (Skype owned blog)
    Windows 10 Devices: a new chapter | Microsoft News

  • The Nokia Microsoft Post

    Nokia Microsoft deal

    In the week since the news broke my thoughts on the acquisition by Microsoft of Nokia’s device business have slowly coalesced into the notes that make up this post.

    The two Nokia’s

    The acquisition is a tale of two businesses, the first business is a business services, cloud computing and network hardware business: HERE maps (Naviteq) and Nokia Siemens Networks. This business has improved as many of the major developed world markets have expressed concern over Huawei and ZTE infrastructure. It depends on having high-quality, high touch relationships with the world’s wireless telecoms businesses and internet businesses.

    Of the two I suspect that Naviteq could be the most profitable because of the cost of gaining high quality up to date geo-location-based information that can be integrated into business support systems. Nokia’s infrastructure business faces a number of challenges:

    • The high cost of research and development to remain at the table for fifth generation networks. This problem was exasperated as Nokia was on the wrong side of the WiMax/LTE battle
    • They are in a field where there are other well established hungry western players (Alcatel-Lucent and Ericsson) and ‘safe’ Asian competitors (Samsung)

    The other Nokia is the devices business that is more familiar to consumers; this is the Nokia Microsoft business now. Like the first Nokia I outlined this one too needs high quality, high touch relationships with carriers in countries where they represent the primary distribution channel. In developing markets with high pay-as-you-go phone usage the channel partner structure maybe more complex; and I haven’t even discussed the grey market channel yet which makes up to 80 per cent of sales in some countries.

    The relationship with carriers is wrapped up in technology choices and Nokia’s handset business was adversely affected in two ways:

    • A number of carriers including NTT DoCoMo and China Mobile had bought into Symbian as an operating system and had actively supported it in their products. NTT DoCoMo had contributed to the Symbian stack and bought phones from the likes of Panasonic that ran SymbianOS S60
    • Nokia had successfully got a number of carriers including China Mobile on board with its future internal operating system MeeGo

    The Nokia Microsoft pivot was sudden and burned bridges of trust that would take time to rebuild. Secondly Symbian S60 and to a lesser extent MeeGo encouraged consumers to use a phone as a phone; they were designed with a design philosophy from the ground for both voice and data usage. Android and iOS fall decidedly more towards being connected personal digital assistants (PDAs) that also make calls. From a user experience point of view there is not a million miles of separation between iOS, Android and the Treo range of Palm OS-based phones of the early to mid-noughties (guess where Apple got its ringer mute switch from).

    Wireless carrier business models have been built around selling the convenience of being able to make voice calls whenever you want, data is a comparative latecomer to this business. The reason why mobile phones went to digital in the first place was to increase the network carrying capacity of voice traffic. A key benefit of 3G networks for carriers was not selling video clips like 3 first tried to do but efficiently carrying voice traffic as most people of secondary school age or above had a mobile phone.

    So having an operating system that puts a universal VoIP (voice over IP) client at the centre of its offering is not going to win any friends. Microsoft acquired Skype in April 2011 and has progressively put the VoIP client at the centre of its messaging offering and phone software.

    Secondly, Microsoft’s record of mutually beneficial success in the PC industry, portable computing industry and telecoms sectors features a list of troubled companies. Specifically in the telecommunications sector:

    • Nortel – Microsoft and Nortel formed the Innovative Communications Alliance in June 2006 that was focused on unified communications within enterprises (the use of VoIP PBXs would facilitate video, conference and phone calls without paying phone charges to carriers for multinational companies). Three years later Nortel is broken up into pieces and sold off. The reasons for this were legion: the company had been hacked for years and was a victim of industrial espionage on an epic scale, the company had been over-exposed to the telecoms bubble of the late 1990s through its sale of optical equipment. One of my clients at the time RSL Communications had a backbone network based on Nortel optical equipment. It’s ubiquity left the business exposed. Mismanagement that led to a number of restatements of the company accounts with over-valued assets and under-valued liabilities
    • Motorola – Though one tends to think of the RAZR feature phone and the Android phones (pre-and-post Google acquisition); Motorola had taken a number of smartphone attempts. It had built the first smartphone based on Linux running Java applications back in 2003, which had proved to be very popular in China due to it’s handwriting interface. It had also been a part of the Symbian alliance and had used the UIQ interface favoured by Sony-Ericsson. It had even licensed the Palm OS and had an early device in development by 2001. However at the critical time around the launch of the original iPhone Motorola had a Microsoft Windows Mobile-powered smartphone the Motorola Q. That worked out sufficiently well that Motorola abandoned it and focused on Android devices. The company was eventually acquired by Google as much as a defensive move to protect the Android eco-system from Motorola patent suits as much for the handset manufacturer’s business
    • Palm – Palm was founded in 1992, they originally created a device called the Zoomer in partnership with Casio and Tandy – who provided the manufacturing and supply chain whilst Palm built the personal information manager (PIM) software. The operating system came from Geoworks, who also made the operating system for the original Nokia Communicator devices. The Zoomer was not a financial success but Palm did manage to sell synchronisation software to Hewlett-Packard and handwriting recognition software to Apple for the Newton range of PDAs. The company was acquired in 1995 and released the Palm-Pilot range of devices in 1997 running the Palm OS that had been developed the previous year. The Pilot 1000 and 5000 were replaced by the Personal and Professional – around about this time the devices were also sold with a basic dial-up modem providing stand-alone connectivity. The year 2000 saw Palm at the top of its game with the launch of the Palm V and the company being floated by parent 3Com on the NASDAQ; though the dot com crash saw its valuation drop by 90 per cent in a year. Palm has its first smartphone the Treo 180  acquiring Handspring. The Treo series of smartphones did well in North America and proved a viable alternative to the BlackBerry for many people. I had the Treo 600 and then the 650 from 2004 to 2007. Soon after this Palm started using Windows Mobile on some of its devices and this occurs around about the time that the business past its peak, prior to the strategic investment by Elevation Partners and sale to Hewlett-Packard
    • Sony-Ericsson – Sony Ericsson started with an unpromising origin. Ericsson’s mobile phone business had been crippled by a fire at a supplier in 2000, so it sold a share in the business to Sony who had been on the sidelines of the mobile industry despite some early successes with the Sony CM-H333 in 1993. Sony struggled to deal with the change in market brought about by the first iPhone. The company used Windows Mobile for its Xperia phones for two years. Eventually Sony-Ericsson moved over to Android in March 2010, the company has struggled to remain relevant in the mobile market, but has made headway with Android
    • Sendo – was a start-up founded in 1999, they signed an agreement with Microsoft to be the company’s go-to-market partner for their Smartphone 2002 mobile operating system. The deal gave Microsoft a royalty-free license to Sendo’s designs if the company went insolvent. There was a legal dispute when Microsoft used Sendo’s designs to create the first of the Orange SPV phones made by HTC. Sendo rolled out Symbian handsets and cancelled its Microsoft-powered devices. Microsoft eventually settled out of court with Sendo, relinquished their shareholding in the company and Motorola eventually absorbed the business and intellectual property. However the the company name became a by-word within the industry damning Microsoft
    • LG – In late 2008, the Korean chaebol signed an agreement with Microsoft that focused on a strategic collaboration on mobile technology, which was widely expected to mean Windows Mobile phones. The mobile devices unit suffered continued losses, eventually in February 2013 LG said that there was no demand for Windows Phone devices and moved its portfolio exclusively over to Android where it competes with a respectable performance against Samsung

    All of this means that the Nokia device business hasn’t been a master of its own destiny since the company launched its transformation almost three years ago.

    What is Microsoft actually buying?
    The Nokia device acquisition by Microsoft

    I remember once talking with a friend of mine who had worked on the Microsoft account for along time and they once told me that Microsoft never buys something that it can build more cheaply itself. Which then brings me to four questions:

    • So what does Nokia have that Microsoft wants?
    • What does Microsoft currently have?
    • What would Microsoft with Nokia have, that neither party currently has?
    • How is Microsoft paying for the deal?

    What does Nokia have that Microsoft wants?

    Nokia historically was strong because of it’s brand. I did a quick search on Google Trends to get some sort of proxy comparison on the relative strengths of different brands and in the data you can see that Nokia Lumia and Nokia Asha have a higher level than Windows Phone or Microsoft Surface.

    Secondly the Nokia brand on its own is still hugely dominant compared to Microsoft’s other mobile brands. To get that kind of brand profile would be very expensive for Microsoft, but more importantly would take time that the company doesn’t feel that it has.

    Nokia had manufacturing prowess, the Nokia Asha handsets have a quality that generally belies their price. The move over to the Lumia left lots of Nokia’s production lines quiet and their supply chain for the factories wasn’t as useful as Lumia used different suppliers and designs for many of the major components. For instance the processor in the Lumia range is a Qualcomm Snapdragon, where as Nokia’s Symbian and MeeGo handsets used Texas Instruments OMAP processors.

    In the end Nokia contracted out Lumia production (at least initially) to Compal. Microsoft has its won relationships with OEMs and ODMs in order to manufacture sophisticated hardware like the Microsoft Kinect.

    Nokia along with Samsung has one of the most extensive sales networks in the world for mobile devices. However the company has been scaling this back as a cost-cutting measure as it tried to transition to a smaller size business during its move to Windows Phone.  This has been partly driven in China by the collapse in market share that Nokia suffered during the transition. Microsoft saves time by building on the existing sales network put in place by Nokia.

    Nokia historically had good carrier relationships, however the pivot and relationship with Microsoft have degraded these somewhat.

    A legacy of the sales network and the carrier relationships is a body of knowledge about market differences, preferences, structures and price points with a greater degree of granularity than a report from the likes of IDC can provide. Much of this knowledge will be in the heads of key (but not necessarily senior) members of staff that Microsoft will have to identify and battle to retain in the coming months.

    Nokia historically has had strong design capabilities based on a long history in terms of user research to thoroughly understand the customer use case. The polycarbonate Lumia design language was taken straight from the Nokia N9, and the 41 mega-pixel camera module first worked on Symbian but if some of the design team are still left Microsoft could have a positive asset on its hands.

    Finally, Nokia has a lot of experience in working on nascent areas like mobile payments systems which offer the potential for massive revenues in the future.

    What does Microsoft currently have?

    Like Nokia, Microsoft has an extensive sales network and over the past few years has been expanding across sub-Saharan Africa. Whilst Microsoft has the physical presence it doesn’t necessarily have the right channel for mobile phones.

    With a combined business, certain functions like finance and IT could be merged.

    Microsoft has experience of sophisticated hardware design. The most lauded piece of design that Microsoft has done is the Kinect bar which is surprisingly sophisticated. It also designed the unsuccessful Kin device and the reference designs that all Windows-powered phones have to adhere to.

    In terms of industrial design Microsoft has designed ergonomic peripherals for years. The hardware design if done right can be mated and optimised to the software design that Microsoft also creates.

    Microsoft has a number of killer applications available for enterprise sales including business-grade email and personal information management, customer relationship management software and web search.

    What would Microsoft with Nokia have, that neither party currently has?

    If one looks at Apple’s products the reason why they work well is because of tight integration between software, services and hardware. Microsoft has alluded to this already, in a post-deal interview with C Net Joe Belfiore shed a little light on the fact that Nokia’s hardware designs weren’t aligned with software capabilities as Nokia tried to develop unique features.

    There is also an implication that Nokia would move away the Microsoft mobile team from their US-centric behavioural thinking on issues like Bluetooth sharing of content.

    The second theme that seems to come out is one of speed to act in order to catch up with rival ecosystems and gain competitive advantage. With the Nokia brand Microsoft gets a massive lift in terms of mobile brand awareness in emerging markets. However in order to take advantage of this lift and other performance advantages, Microsoft has to simultaneously and successfully integrate Nokia into the business.

    It is an extra 30 per cent of employees compared to the pre-deal Microsoft. Normally this would be a difficult task, but this is also a Microsoft that is under attack from activist shareholders, looking for a new CEO to replace Steve Ballmer and aligning based on a reorganisation to a function structure.

    Will Microsoft be able to retain the key people at Nokia with the relevant knowledge and be nimble in execution? When I was at college I was told by a professor that seven in every ten takeovers fail to achieve the goals set for them.

    How is Microsoft paying for the deal?

    On the face of it I was surprised to see that Microsoft was paying all cash for the deal, rather than issuing stock. The company has a good cash pile and doesn’t need to borrow, but printing shares wouldn’t have cost anything. It’s the way that Cisco financed its run of purchases through and after the dot.com boom.

    The reality is that the US tax payer is indirectly paying for the deal. Microsoft like Apple has a vast amount of its cash flow sat offshore that they don’t want to repatriate due to US tax law.

    In reality, Microsoft paid closer to 5 billion Euros than 7.2 because of the tax avoidance benefit in the transaction. Secondly, losses in Nokia can be written off against U.S. tax obligations.

    The value judgement on whether Microsoft has over or under-paid will inevitably be coloured by the destruction of shareholder value at Nokia, which has been enormous both in terms of the monetary sums involved and in the decline of Nokia’s contribution to the Finnish economy and stock market.  The second factor to colour the discussion is the likely discount Microsoft shares have as a conglomerate. There are various discussions elsewhere on the web about how Microsoft could realise more shareholder value by being broken down into ‘mini-Bills’. The Nokia acquisition is likely to intensify that discussion further, unless spectacular results can be demonstrated.

    Nokia’s technological choices

    Reflecting back on things, I was surprised by Nokia’s advocacy for WiMax given the telecommunications industry was moving forward with LTE – originally proposed by NTT DoCoMo back in 2004 and supported by TeliaSonera.This choice together with Nokia’s close relationship with Texas Instruments for device microprocessors steered a surprisingly large amount of Nokia’s recent decisions to date.

    The thing that I found most interesting about Nokia’s device strategy pivot under Stephen Elop was the complete abandonment of Symbian S60 OS rather than the S40 OS that current powers their Asha-branded phones.

    If one looks at the current range of Asha phones, Nokia has pulled and prodded the operating system to produce devices described as smartphones without an OS that has multi-tasking. They have even replicated the look and feel of Nokia N9 smartphone that ran MeeGo.

    Nokia could have provided a smoother on-ramp and not upset so many carrier customers by moving S60 down the product line and brought Windows Phone in at the top. Instead they chose a riskier, more dramatic path. This affected carrier partners, the Nokia development community and Nokia users adversely. And this seems to have been a conscious decision by Nokia.
    eBay - Nokia N950 part one
    If one looks closely at this Nokia N950 offered for sale on eBay (presumably by one of the developer community):
    eBay - Nokia N950 part two
    One can see the kind of comment that shows an embittered developer relationship.

    We will probably never know if they were boxed into this dramatic choice by Microsoft, but it seems to dialed the risk factor up even further.

    Finally, the market performance of the Nokia N9 in markets were they were released showed a more mature looking product than the Lumia phones that were launched later. It made the Lumia range look bad and enraged critics by showing them what could have been.

    Why did Microsoft leave so much on the table?

    It was interesting that Microsoft just took a license to patents rather than full rights to Nokia’s patents. I think that this is a bet on Nokia taking a robust attitude to intellectual property licensing. Given that Nokia will be an infrastructure company it could now levy fees on the Android community (and possibly Apple) without consequence.

    This would benefit Microsoft as it would increase the cost of rolling out Android devices, this potentially will give Microsoft room at the bottom end of the market for smartphones. Though I still think that they will be unable or unwilling to compete with the sub $70 per Android handset market segment which is driving smartphone growth in China.

    Which begs the question is there an explicit agreement in place for Nokia to get litigious? Nokia would have to pick its foes carefully, for those players with both infrastructure and handset businesses like Samsung, Huawei and ZTE could be dangerous because of the likely patents they could use in retaliation.

    If things get desperate Nokia could still sell these patents on to the likes of Intellectual Ventures.

    The second item I was surprised to see Microsoft leave behind was Naviteq. The expertise in mapping would have been an asset to all of Microsoft’s business units.

    Mobile would have benefited from having control over their mapping product, online services could look at doing further integration and alignment for consumer audiences. The enterprise part of the business could have used underlying data to help improve applications around customer relationship management (CRM), supply chain management and resource planning.

    I imagine that this could have been for a few reasons:

    • There aren’t that many companies that do what Naviteq does, being purchased by Microsoft may trigger antitrust concerns
    • Naviteq needs a critical mass of users for its HERE maps to provide a decent product
    • Microsoft can get everything they want without buying it
    • It was a deal killer for Nokia who need the cash flow from Naviteq

    What’s the catch?

    • What does Microsoft see that it’s critics don’t in the Nokia business?
    • Will Microsoft be thwarted by activist shareholders?
    • What’s to stop Nokia pressing reset and starting another handset business by acquiring Jolla?
    • Why will carriers want to engage with the newly enlarged Microsoft?
    • Does Nokia have much of a long term future in infrastructure given the competitive landscape of Huawei and ZTE in developing markets and Samsung, Ericsson and Alcatel-Lucent in the more security paranoid western markets?

    More information

    Intel,China Mobile,LGE and Nokia Join MeeGo Handset TSG – Also companies for IVI and Smart TV | TizenExperts
    EU regulators say telecoms block Skype | EurActiv
    Most UK Mobile Broadband Users Could Swap Providers over Skype Blocks | ISP Review
    Microsoft confirms takeover of Skype | BBC News
    The story of Nokia MeeGo | Taskumuro
    Microsoft excluded from DoCoMo’s ecosystem | The Register
    Mobile leaders to unify the Symbian software platform and set the future of mobile free | NTT DoCoMo press room
    Nortel and Microsoft Form Strategic Alliance to Accelerate Transformation of Business Communications | Microsoft News Center
    Motorola to axe Palm smartphone | The Register
    Microsoft’s masterplan to screw phone partner – full details | The Register
    More LG Phones to Use Microsoft System | New York Times
    LG | Communities Dominate Brands
    Why Microsoft really bought Nokia | I, Cringely
    Nokia confirms layoffs, pulls back sales channels in China | ZDNet
    For Microsoft and Nokia, fewer secrets | CNet

    More Nokia related content here.

  • Microsoft Surface

    Some thoughts on the implications of the Microsoft Surface launch:

    Microsoft and tablets

    I found the Microsoft a curious device full of interesting design choices. It was interesting because it seemed to be defined by what it wasn’t. The device was a world way from the clunky tablet keyboard combos by the likes of Fujitsu and Motion Computing who had helped Microsoft get tablets a niche place in the enterprise many years ago.

    The keyboard covers were also an acknowledgement that whilst keyboards are useful tablets aren’t really content creation devices in the sense that ultra books are. The keyboard looked like the kind of membrane keyboard found on industrial computer kiosks or the vintage Texas Instruments Speak’n’Spell toy. For the supposed ultra book competitor it was an interesting choice. As a MacBook Air user, I already chafe at the limited travel keyboard on the device with its limited haptic feedback which acts as a limiting factor on my touch typing speed.

    What I haven’t been able to reconcile is where a tablet fits into my life. I have used one to enjoy my South China Morning Post subscription and have skimmed the online version of Wired magazine (give me the print any day). However most of the time it just services as an ancillary screen displaying ambient media like TweetDeck or the occasional Skype call. Quite how tablets will revolutionise my life is at the moment unclear. My architect friend who evangelised the iPad to me originally seems to be using it a lot less since upgrading to an iPhone 4S, and isn’t in the market for a new iPad unless something radically changes.

    Curious design language

    When I saw the pictures of the Microsoft Surface, the first thing that I thought of when I saw the magenta and cyan keyboards was Nokia’s design language for the Lumia handsets. The Windows 8 colour palette may naturally dictate some of the colour choice, but it did make me think that Nokia could be integrated into a newly muscular hardware division at the right (fire sale) price. Quite how Microsoft would keep the complex carrier relationships and channel together is another matter, maybe I am reading too much into this design choice?

    Microsoft and the PC manufacturer

    Whilst some articles have talked about the Microsoft Surface as signalling a post-PC age; I think that this lacks a certain amount of nuance. It more resembles the approach of corporations who ‘right-size’ their organisations cutting out swathes of management and flattening the organisation to get closer to the consumer. In this respect the Surface is an expression of an aspiration for a post-PC manufacturer age.

    Let’s reflect for a moment on the relationship between Microsoft and its manufacturer partners. The Microsoft monopoly was started off by IBM back in 1981 and innovators like Dell and Compaq were instrumental in driving the PC into the corporate arena. Compaq is now just a memory as part of HP’s business pioneered portable computing, Windows-based PDA devices and the MP3 player. IBM’s ThinkPad line was a mix of robust engineering and clever product design that popularised the notebook as an enterprise computing device. Dell innovated on process, allowing customers machines tailored to their needs, developed new techniques in global supply chain management and pioneered direct-to-customer telephone and online sales.

    By the early noughties however, the PC as a product offered little margin of profit for the manufacturer. Manufacturers like Sony and HP relied on software distribution deals to subsidise the cost of a computer and IBM had realigned its business towards services and consultancy so saw no need for its own PC business.

    It is hard to invest in continual product innovation when you are running flat-out to stay afloat. By this time, Microsoft had maximised its profit on these computers, but its partners had reached the end of their usefulness so a vertically integrated model became inevitable.

    This antagonistic and excessively exploitive approach to business is likely to act as a warning for future Microsoft potential partners like cellular phone and fixed line telecoms providers or handset manufacturers. Every step forward that Microsoft takes disrupts an intricate thread of relationships in markets that are key to the company’s future.

    Microsoft and technical capability

    One of the arcane features of using Microsoft Windows over the years has been getting the different components to talk to each other. A PC gaming rig at one time needed as much care and attention as an MG sports car, tweaking, prodding or even replacing components to get the machine to work with a new game. Prior to Windows’95 it was the Sound Blaster series of audio cards that allowed multimedia playback. A standard that coalesced in spite of Microsoft rather than with their help. All the different hardware permutations that need to be accounted for take a toll on code creation, integrity and innovation.

    By taking control of the complete product including both industrial design and hardware, Microsoft has reduced this effort massively. It means that the all-in-one vertically integrated model of old computing (DEC, Hewlett-Packard, IBM, CDC etc) that was considered to handicap Apple is now economically sensible again. It is like the swing of a massive pendulum with a forty year sweep is finally going backwards.
    Rogue on Mac Classic
    When Steve Jobs was commissioning the original sit-up and beg Mac design he looked to the likes of Sony and Cuisinart for inspiration. Apple’s concept of the computer as an appliance took about three decades to get mass-acceptability and the Surface gives it the Microsoft seal of approval as an approach.

    Microsoft and the channel

    The fact that Microsoft is prepared to go to the mats with the manufacturers that have supported its business for the past three decades indicates that Microsoft doesn’t need these people to reach out to the channel. Of course, Microsoft has its own retail channel relationships for software, the XBox and accessories like mice and keyboards. The question is how receptive and/or passive will the channel response be to Microsoft? If Microsoft will roll on partners like Dell and Acer with this tablet launch what will it do to the channel partners?

    Secondly, as the PC industry became unprofitable companies like IBM, HP and Dell moved into services; for large enterprise clients the very manufacturers that Microsoft has just spurned become the channel. Awkward.

    Microsoft and the supply chain

    Looking at the Surface immediately brings home the fact that Microsoft must have worked closely with an original design manufacturer such as the likes of Foxconn, Compal or Quanta to create their tablets. This is a calculated risk by the company involved as it is likely to lose business from affected PC manufacturers.

    The choice of original device manufacturer will be instructive, if it was Quanta in particular, Microsoft is likely to be relying on their patent portfolio to provide the Surface with ‘air cover’.  Foxconn is more likely to invest in specialist production facilities like the thousands of milling machines it uses to produce Apple’s i range of devices.

    You can find more Microsoft related content here.