Daniel Eran Dilger
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Zune 2: How Microsoft will slaughter Windows Phone 7 using Nokia

Daniel Eran Dilger

For a historian, the only thing more fun than seeing how history repeats is examining what things do change as events recycle. Looking at Microsoft’s takeover of Nokia, I can’t help but bring up Microsoft’s attempts to kill the iPod with the Toshiba-built Zune, an effort that backfired, killing Microsoft’s Android-like, “open” PlaysForSure platform instead.

Zune 2: Como Microsoft masacrará Windows Phone 7 utilizando a Nokia (en español)
The Zune Phone arrives
What Microsoft is really doing is converting Nokia into its primary Windows Phone 7 manufacturer in order to finally deliver that Zune Phone that a handful of fans have been waiting for ever since the iPhone crushed the second generation of Zune players in 2007.

If you’ve forgotten, Microsoft rolled out Zune after realizing what a mess its Android-like PlaysForSure program for media players was turning into. With Zune, Microsoft thought it would run the music store and manage the platform itself, and Toshiba would build the hardware.

Instead, Zune killed the entire PlaysForSure ecosystem and screwed all its remaining licensees, despite Microsoft’s assurances that Zune would somehow only compete with Apple iPod and leave PlaysForSure licensees unharmed.

This all happened again and again

In 2009, I observed that Microsoft was gearing up to similarly slaughter its Windows Mobile licensees under Pink, a project that intended to release a phone based on elements of the Zune HD and Windows Mobile 6.5, without actually being compatible with either.

The Pink team acquired Danger, the Java-based platform vendor behind the T-Mobile Sidekick and Hiptop. Microsoft subsequently released the KIN, a product so bad it was canceled within weeks, destroying the remains of Danger and casting a shadow of death over the launch of Windows Phone 7.

Not satisfied with throwing Danger into the chipper/shredder to destroy one of the world’s few viable mobile platforms (which Google essentially selected to form the basis of its Android platform), and still smarting from an embarrassing launch failure of WP7 (which was beaten by Samsung’s Bada and, it appears, even the relaunch of iPhone 4 on Verizon), Microsoft is now turning to Nokia, the world’s largest phone maker.

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Disregard ecosystem, acquire partners.

Microsoft isn’t interested in the majority of Nokia’s business, which revolves around low end S40 Java phones. Instead, Microsoft wants to repurpose Nokia’s Symbian and MeeGo smartphone business into its premier manufacturing partner for WP7 devices, just as it partnered up with Toshiba on HD-DVD and Zune.

This has got to make other WP7 licensees feel a bit stupid for being duped into another PlaysForSure-type backstabbing, particularly Dell, which recently made a splash about how it would be shifting all of its users to WP7 phones in a bid to cozy up with Microsoft. LG and HTC are probably not exactly stoked to be reading about Microsoft’s plans to give Nokia special treatment either.

At the same time, all of Microsoft’s WP7 licensees should have figured out by now that their Windows Phones are not selling and not going to sell. LG, a master in setting lowered expectations, said it planned to stick around to see if WP7 might sell on low end devices to users content with a “boring” smartphone. There’s not much room left for disappointment.

It’s hard to feel too much pity for these companies; it’s like watching an affluent man excitedly buying wedding rings with a woman who he knows has been married to a string of wealthy men who all died under mysterious circumstances.

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What happens to Nokia?

But what about Nokia? It’s getting married with Microsoft at a shotgun wedding. Its only alternative was to do nothing and die in a fire, or adopt Android and relive its history with Symbian all over again, this time being the minority player in the open platform game rather than the ringleader calling the shots. Nokia appears to simply be following the advice of Mae West: “When choosing between two evils, I always like to try the one I’ve never tried before.”

How will that work out? It didn’t work out so well for Palm back in 2005 when it partnered with Microsoft to deliver a Windows Mobile Treo; Palm’s market share collapsed. It didn’t work out so well in 2006 when Motorola partnered with Microsoft to deliver the Windows Mobile Q; Motorola’s market share collapsed.

In 2007, Microsoft described Windows Mobile as the “fastest growing mobile operating system,” noting Toshiba as a new licensee. That worked out so well that Toshiba sold off its smartphone business to Fujitsu to focus on making chips for other companies in the smartphone business. Japan’s neighboring Casio, Hitachi and NEC have all experienced so much success with Windows Mobile that last year they merged their smartphone operations in hopes of simply staying alive.

In 2008 Sony Ericsson showed off its XPERIA X1 and Samsung demonstrated its Omnia, with both of their new flagship models running Windows Mobile. Both subsequently flopped, sending the companies to Symbian to show off Idou and Omnia HD, which both flopped, sending the companies to Android.

In 2009, LG formed an “enhanced partnership” with Microsoft to deliver WiMo 6.5 phones as that ship sank. It stayed aboard as the ship was rechristened “WP7” this year, even as it began to sink faster. So who’s to say whether the “enhanced partnership” between Nokia and Microsoft will work out well.

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Why Nokia decided against Android

The only thing Nokia would have gained by going with Android instead would have been the adoration of nerds who don’t buy things. They’d loved to have been able to say that there is an Android licensee that sells more phones than Apple, or that even more of the world outside Apple is collectively using the same software. But bragging rights aren’t the same as profitability.

Since the WP7 platform is essentially stillborn, Nokia can adopt it without any real competition. As an Android licensee, it would be making phones that compete directly against Samsung, HTC, Motorola and Sony Ericsson, with little to offer apart from hardware differences. Being an Android licensee would mean that everything Nokia sells would be compared in price against the cheapest devices running the same software, rather than standing out as something people might choose for its features and overall package like the iPhone.

Even the mobile carriers were opposed to Nokia using Android, wishing for at least a three horse race in the mobile handset market. And based on Verizon’s about-face on Android, combined with comments from LG saying that carriers don’t like Android because users think it’s too complicated, and looking at the approval ratings from Android users, it appears that there’s a problem related to selling Android phones that involves getting lots of complaints and returns.

By backing Android, Nokia would have put itself in the bargain bin of smartphones alongside Samsung, LG, Motorola, Sony Ericsson, and that mysterious cloud of no-name “others” that sells the majority of the phones running Android. By backing Microsoft’s WP7, Nokia can hold onto its unique identity and remain in the rarified air of RIM and Apple, continuing to act as one of the top three smartphone makers who actually controls its own platform, at least in a tight partnership with Microsoft.

Microsoft is just as desperate as Nokia, and neither have any real options. It’s like a very ugly man who needs a green card marrying an insane woman turning 40 and still hoping for a baby. Neither can really walk out on the deal, and yet neither can really say they are happy about it either. The best they can say is that they’re not giving it away for free and will never be alone.

Nokia is not also alone in being wary of Android. HP is trying to achieve a similar control of its own destiny with its Palm acquisition. Samsung is doing something similar with Bada, and even HTC is hedging its dual bets against Android and WP7 with its own embedded platform running BREW. When the top three smartphone makers reject Android, while the next two in line initiate fallback plans, it makes you wonder why Android proponents haven’t contemplated why commercial entities with money on the line don’t share their own ideological enthusiasm for Android.

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The good news about Microkia

We do have some reason to rejoice that Microsoft and Nokia aren’t going to simply sink alone, in parallel within their own leaky boats in the mobile market. The partnership provides additional competition in the market, offering an alternative to the monoculture that an all-Apple or all-Android world might offer, and a third option to a simple duopoly of iPhone-like platforms.

It gives Microsoft a suitable place to dump billion of dollars from its Windows and Office monopolies. It keeps Finland employed. It proves that Symbian was the crufty mess it was profiled as back in early 2007. And it verifies my prediction that Microsoft would eventually slaughter its Windows Mobile licensees by repeating its Zune strategy, twice in a row.

Best of all, it keeps alive a comic foil for my future writing, as well as fractionalizing the fan base of Apple haters, who will now have to decide which of the two second rate iPhone platform clones to back in their hatred of Cupertino, something that is always fun to watch and lampoon.

Further, by keeping the mobile market competitive, it opens a greater opportunity for new platforms, such as HP’s webOS and Samsung’s Bada, neither of which could stand out in a world dominated by a duopoly of a minority innovator on the high end and a boorish monoculture monopolizing everything else. And who wants to just relive the platform history of the 90s again?

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