Friday, June 24, 2011

Nokia - Microsoft Smartphone Partnership Risks

1. Windows mobile is a very new entrant in the market with very low consumer penetration levels and public awareness. There is a risk that Nokia will not be able to integrate it to make it into a competitive product.

2. There is a danger of Nokia brand dilution due to the partnership with Microsoft, particularly in countries where Nokia has a predominant mindshare like India and China.

3. Even though Nokia is banking on the Microsoft brand and partnership to propel it in the premium market of USA where Nokia has been lagging, it is possible that this will not happen due to the strong presence of Apple, Google and RIM.

4. Nokia will be paying royalty to Microsoft for using the Windows platform on its phones which can lead to an increase in the prices of its handsets reducing its competitiveness. It also might erode margins in price sensitive markets like India and China.

5. Since it is abandoning its own R&D efforts in the OS space, it might be left stranded as just another mobile box maker if the partnership is not successful.

6. The partnership has the potential to create dissatisfaction amongst Nokia employees since there will be a reported 7000 layoffs. This can cause employee attrition and a significant drop in employee productivity.

7. Meego was an OS platform that was created for mobiles as well as Tablet computers, an area where Nokia is already very late. Removing Meego will leave it even more vulnerable to the future mobility solutions.

8. For Microsoft, since it has sweetened the deal by giving billions of dollars to Nokia, if the deal goes sour, it can lead to the death knell of the Windows mobile platform. This will be very bad for revenues and the Microsoft brand itself.

9. If the deal is unsuccessful, it will leave Microsoft without a potential alternative to its cash cows of Office and Windows platforms leading to significant problems in the future.

(Note: Some of these are derivatives of an article from the Nokia official blogsite itself)

1. Nokia-Microsoft Partnership implementation background and questions
2. Nokia - Microsoft Partnership recommendationsLink