Last week's announcement that the Nokia name was returning to the world of smartphones has been welcomed by many, although the byzantine deal to do so has raised some eyebrows. It should also prove beneficial to one company. Even though
It's worth nothing two points about Microsoft's move into mobile hardware with the historic purchase of Nokia's Devices and Services division. The first is that it happened on the previous watch. Even though it was one of the last major decisions made by Steve Ballmer it was still 'something the last boss did'. There was no corporate attachment to keeping the project alive.
Secondly, Microsoft has already accounted for the loss of the Nokia/Lumia division. July 2015 saw the company write-off $7.6 billion in respect to the mobile adventure. Although devices are still on sale, the handset focus is moving away from a mainstream hardware play into something a little more 'demonstration/boutique' style, I've no doubt that Microsoft will still release a Windows 10 powered Surface Phone in 2017, but this will be to showcase the technology of the OS to manufacturers, not to generate sales and market share.
What I love about last week's move is that going forwards it represents a zero-sum win for Microsoft. The costs have already been absorbed, but the rejuvenated Nokia brand is going to provide
The perception of Android being 'free' continues, but there are many licences that are required to provide users with the experience they expect. Microsoft has a nice batch of patents that Android manufacturers will licence. While there would likely be a sweetheart deal in place to reduce any payments the new Finnish company will need to make, I'm sure there will still be some payments.
That will be a tidy sum if the feature phone business moves over to an Android platform. Conservative estimates puts the existing Nokia feature phone sales at 70 million units for 2015, and on course for 50 million units in 2016. If this 'new' Nokia switches the current feature phone business over to Android-powered devices in a refreshed line-up for 2017, it's very easy to argue that this skew of devices alone could reach 40 million units. That's a lot of Android licences, but it's also a significant slice of smartphone market share - the recent quarterly figures from IDC suggest ten million units a quarter is good for a three percent overall market share.
As well as ongoing revenue, these new handsets would prove fertile ground for Microsoft to gather more users into its cloud-based services. Microsoft's cloud-based services have a strong suite of apps on Android - from Skype and Office, to Outlook and One Note - which are showing up as pre-installed apps on many leading smartphones. Nokia's assumed push into the volume markets in newer territories will create a soft sign-in process for Microsoft. It won't capture every Nokia user, but assuming that the apps are pre-installed it can capture a lot of them.
Which brings me back to Microsoft's change of direction under CEO Satya Nadella. He has moved away from an approach that siloed Microsoft's software in proprietary hardware, and is embracing an approach that emphasises the ability to use Microsoft's cloud services on any device, no matter the host operating system.
Which is just the sort of strategy you need in a world where Android is the dominant platform by volume, and one of the masters of 'sell low, sell lots' is ready to return to the market and looking for some software.
Microsoft's cloud services, the Nokia brand name, and a lot of feature phones and smartphones going on sale in 2017. This could be the beginning of (another chapter in) a beautiful friendship.
(Now read why Microsoft is delaying the launch of its Surface Phone).
