It’s been quite a while since I wrote a Smartphone Wars post; I let the series lapse when I concluded that the source I was using for U.S. market share figures had likely disconnected from reality (and more recent surveys from other sources suggest I was right). But the developments of the last couple of days demand comment. Nokia has sold its phone business to Microsoft; Stephen Elop has returned to Microsoft to head its devices group; and there is talk he might succeed Ballmer.
You couldn’t make this stuff up for a satirical novel and have it believed. The conspiracy theorists who maintained that Elop was a Microsoft mole sent in to set up a takeover look prescient now – but a takeover to what purpose? Nokia’s phone business, the world’s most successful and respected a few short years ago, is now a shattered wreck.
And as for Elop: he masterminded what was probably the biggest destruction in shareholder value ever – and this is the guy who’s being talked of as Ballmer’s successor? Astonishing. On his record, the man isn’t competent to run a Taco Bell store; that that he’s even in consideration suggests Microsoft’s board has developed some perverse desire to replace a strategic idiot with an even more wrongheaded strategic idiot.
While all this is going on, IDC now has Android up to 79.3% worldwide market share and still rising; iOS is down to 13.2% and falling; and the rest of the ecosystems are scrambling for 8% of scraps. Microsoft, at 3.7%, is just barely leading the bush leagues in the presence of Blackberry and Symbian’s continuing collapse.
There have been a rash of stories lately about how good Microsoft’s sales-growth figures look year over year, but I rather suspect the company is up to its old channel-stuffing tricks. Actual consumers don’t report any interest in Windows phones (I’m not seeing them on the street) and the company’s Surface tablet line has been a dismal flop.
The new deal means Nokia is done, finished, gone. It will retain only its digital-mapping and network-equipment businesses and a handful of lottery tickets in the form of patent lawsuits; the smartphones and dumbphones go to Microsoft, where as head of the devices group Elop will (incredibly) continue to manage them even if he doesn’t succeed Ballmer.
One thing the change means is that we can expect the dumbphone side of the business (the part that, you know, made all the actual money back when Nokia made money) to be resource-starved and wound down even more rapidly than this was happening at Nokia. Because there is no place in Microsoft’s strategy for a business that doesn’t feed consumers to its Windows/Office cash cow, and there’s no effective way dumbphones can do that.
But I don’t really see how acquiring Nokia’s smartphone business gives Microsoft any advantage it didn’t already have under its previous sweetheart deal with the company. Well, unless Ballmer somehow thinks 0.5% market share is worth paying $2.2 billion for, which would be exceptionally stupid even by his chair-throwing, monkey-grunting standards.
If Elop was a mole, what were his instructions? “Elop. Go forth. Destroy Nokia so we can buy things we already effectively control for huge amounts of money.” Sense this makes not.
I’m put in mind of the wave of mergers in the 1980s among mainframe computer manufacturers, what we called at the time “dinosaurs mating”. Those didn’t make any sense either; when you merge two huge, doomed, inefficient thunder-lizards together you don’t tend to get a mammal.
Meanwhile – and of course – Android continues to stomp its competition flat. Even the post-Jobs Apple can’t stem the tide; it’s pretty close to the 10% niche market share I predicted back in 2009 already, with no sign that trend will or can be reversed.