Is Nokia destined to be the next BlackBerry?

Is Nokia destined to be the next BlackBerry?

SAN FRANCISCO - Is Nokia the next great wireless brand destined for landfill?

The bargain basement buyout of BlackBerry last week is a stark reminder of how fast-paced the velocity of change occurs in the wireless business. It also shines Klieg lights on Microsoft's absorption of Nokia's beleaguered handset business.

It wasn't that long ago - just a couple of years - that Nokia could still boast that it was the world's largest seller of smartphones. Granted the deceleration started earlier, but Nokia never managed to parlay that early advantage into a sustainable leadership position in that all-too-important category.

Smartphones are arguably the most important technology device to emerge since the personal computer during the last century. Now Nokia's handset business, which was once a gold standard in mobile wireless telephony, is fighting to stay relevant after recently being rescued by Microsoft, which has agreed to take the handset business off its hands for $7.2 billion.

Microsoft's acquisition of Nokia's handset outfit has given some optimists hope that the software maker can emerge as a major competitor in mobile computing. But some critics see the move as more of an act of desperation by both Nokia and Microsoft, rather than a logical step to build a competitive platform in mobile phones.

Personal computer sales, obviously, are in decline at the hands of tablets, smartphones and other mobile devices. In Nokia, Microsoft is chasing a dying business in an attempt to reinvent itself and to persuade stockholders that it can still innovate with new products and compete in wireless.

However, the buyout basically transfers the structural problems Nokia couldn't figure out independently to Microsoft, a company, mind you, that actually has less experience in the hyper-competitive mobile computing landscape than Nokia.

The fundamental problems are still the same. The demand for phones on the Windows operating system simply isn't what either company had hoped for. For the most part, Microsoft got the operating system right this time with Windows Phone after multiple failures. But again - which is a recurring theme with Microsoft - it may be too little, too late.

USA TODAY columnist Mark Veverka.(Photo: Martin E. Klimek, USA TODAY)

Both consumers and "pro-sumers" are already deeply addicted to their iPhones and Google Android phones, dividing western markets essentially into two operating system camps: iOS and Android. Nokia stubbornly stuck with its Symbian operating system way too long before opting to double down on Microsoft's latest overhaul of its mobile platform.

What would it take to keep Microsoft/Nokia relevant in handsets? They would have to produce a hit mobile product, not necessarily a smartphone. It could be a tablet device or something in between. But a mere "me-too" gadget probably won't get the job done, says telecommunications analyst Edward Snyder, principal of San Francisco-based Charter Equity Research.

"Microsoft needs to produce the next "must-have" device for consumers to even take notice," Snyder argues. "That's a tall order that's not likely to occur in the near-term," and it would require a significant amount of capital to develop, he adds.

Of course, Microsoft has seldom been reticent to invest vast sums chasing markets in which it had previously whiffed. (See Internet search losses). But the company is undergoing a major restructuring, and the person previously responsible for the deep pockets, Chief Executive Steven Ballmer, is retiring. Will the new yet-to-be-named succeeding chief executive be expected to pump tens of millions of dollars into hardware for Windows Phone? Tough to tell. If it's departing Nokia Chief Executive Stephen Elop (author of the infamous "burning platform" memo), then perhaps such an investment might not be out of the question.

At its recent financial analyst briefing, Microsoft explained that it was making significant changes to its organizational structure. The company also strongly dismissed the idea that it should focus more on enterprise customers than consumers, even though profitability is lead by the enterprise business, says technology analyst Bill Whyman of ISI Group, a research boutique. "CEO Ballmer forcefully made the case why their devices and services strategy was the right path," Whyman says.

So, the deep financial commitment to stay in the handset game indeed may be there. But for his part, Charter's Snyder contends that it could be good money chasing after bad, suggesting that Microsoft's bet on Nokia likely won't succeed. "Judging from past turnaround attempts, Nokia's handset division will probably remain a mere shadow of its former self," Snyder says.

Worse yet, Snyder envisions that the handset operations could "eventually get jettisoned by Microsoft, but only after unfruitful and extensive investment."

It wouldn't be the first time that a high-profile company was acquired by Microsoft and disappeared into the abyss.

news by October 04, 2013 at 01:01AM