A couple of weeks ago I wrote how Asia would be the key to Microsoft’s success with its soon to be acquired handset business and Windows Phone. Well, new IDC stats out this week confirmed the importance to Redmond of one of Asia’s biggest markets, India, but also that it may struggle without the Nokia brand.
India is now rated by many analysts as the fastest growing smartphone market in the world.
The numbers speak for themselves. The largest democracy on the planet has a population of over 1.3 billion but smartphone penetration of only around 10 per cent – in this it’s some way even behind China and has huge growth potential.
The question is who’s going to capitalise? Well, at the moment it’s the same old story of cheap, local Android handset providers. In India Karbonn and Micromax are two of the most prominent.
Windows Phone was a surprise second place in Q2, however, with a market share of 5.3 per cent, according to IDC. Granted, this is way behind Android’s 90+ per cent, but still above iOS and BlackBerry and remember that percentages translate into 500,000+ units.
The key to success going forward, however, will be how it handles the Lumia, according to IDC analyst Kiranjeet Kaur.
She told me that although Nokia sells the Lumia 520, 620, 625, 720, 820, 920 and 925 in India it has been the 520’s low price point of around Rs 10,000 (£100) which has made it popular.
Microsoft can’t rely on the Lumia range to continue attracting buyers in the future though, because the all important Nokia brand will soon be removed.
“People buy the Lumia because they’ve had an association with Nokia for many years and see it as a good brand,” she said. “But if the [acquisition] deal goes through in the next few months I’m not sure how quickly Microsoft can do the rebranding.”
Time will tell whether this makes a big difference. It has to be said that Nokia was far from coasting in India. Despite winning the country’s Brand Trust Report for the third year in a row in February, it has been mired by tax problems and slowing sales.
Still, India remains Nokia’s second largest market after China, according to IDC, so the next 12 months will be a key test of whether Microsoft can continue the momentum and take on the likes of HTC and Samsung in the mid-range as well as stealing a bit of share from domestic players at the lower end.
It will be an uphill task.
It was Microsoft and Nokia’s big week this week and I’m sure the two will be hoping to hog the headlines going forward as much as they did over the past seven days. Now some might have unkindly described the alliance as “the sounds of two garbage trucks colliding”, but I’ve been getting the low down on why the deal should matter to APAC, or more realistically, why APAC should matter to Microsoft.
Let’s get one thing straight, APAC is essential to Microsoft’s future success in the smartphone space, not just because it has the world’s largest and fastest growing market – China and India respectively – but because Nokia has a really good legacy footprint there thanks to its feature phone biz.
The problem for Redmond, however, is that we’re not talking about feature phones any more, but smartphones. These markets are increasingly demanding smartphones, albeit low-end handsets, not feature phones. It’s why local players like Huawei, ZTE, Micromax and others are growing at such speed.
Nokia’s stock is greatest in India, where it has been voted most trusted brand for two years in a row, despite on-going tax problems with the authorities. Yet according to IDC’s Melissa Chau its relationship with operators isn’t particularly great anymore, so to large extent Microsoft is going to have to start from scratch here.
Building a budget Lumia will be vital and Chau told me Microsoft could do two things to help achieve this:
- Remove licensing charges – at the moment it’s built into the cost of the phone – which would wipe about $10 off per handset
- Use its combined internal expertise now with software and hardware to tweak Windows Phone so that it can run on hardware specs more suited to a lower price point.
It also needs to sort out Asha, she told me, starting with making the handset more attractive by sticking some Microsoft apps on it, and then hopefully in time transitioning those customers to a low cost Lumia.
This ain’t gonna be easy. The competition is fierce out there and with Nokia’s star waning and a severe lack of apps in the ecosystem the best Redmond can probably hope for is cementing it in third place behind the deadly duo of iOS and Android. With four of the Lumia’s top selling markets in APAC (including no. 1 and 2) however, it must make the region a priority.
Time will tell how successful it is, of course, but time, as we all know, is probably something Micr-okia doesn’t have.
It’s finally happened. Microsoft today announced it is buying most of Nokia’s mobile phone business for a bargain €5.44bn (£4.62bn) in cash.
The deal will see Redmond snap up the Finnish giant’s Devices and Services business for €3.79bn (£3.2bn), license Nokia’s patents for €1.65bn (£1.4bn).
It’s a dramatic last roll of the dice for outgoing CEO Steve Ballmer and neatly brings back former Redmondite Stephen Elop into the fold.
He’ll be stepping aside as Nokia boss to become EVP of Devices and Services, but must be one of the favourites now to succeed Ballmer. If so, this will be one of the most expensive pieces of headhunting in corporate history.
Nokia’s chairman of the board Risto Siilasmaa will take the reins as interim CEO while the deal goes through the usual shareholder and regulatory approvals. Microsoft said it expects the transaction to close in Q1 2014, all being well.
For Microsoft the deal is proof if any were needed that it’s no longer a software company, that it sees success in the smartphone space as crucial to its future and that it can’t rely on a partner like Nokia to deal with the hardware side of things.
A few things occur to me:
- HTC and RIM will be pretty disappointed – who are they going to get to buy up their failing businesses now?
- Agent Elop has now been recalled after 2 years out in the field persuading Nokia’s board to sell to Microsoft. Job done – you may now progress to Microsoft CEO.
- China’s up and coming smartphone poster child Xiaomi was recently valued at $10bn, nearly $2bn more than Nokia at this sale. Surely over-inflated.
- This deal, while it could theoretically ensure phones get out faster to market, is not going to make life any easier for Microsoft or its new Nokia Devices and Services division. Especially in Asia. Its lack of apps will still hold it back.
- Is Nokia still Europe’s largest technology firm? Over 30,000 staff will now be Microsofties but it still has over 50,000 employees on its books working on the reasonably profitable NSN biz and location services. It should be in pretty good shape.
IDC analyst Bryan Ma told me that the deal would give Microsoft a shortcut or “jump start” into the hardware space, but could end up alienating OEM partners.
“It’s got device, manufacturing, economies of scale, and channels to sell into which would have all take it longer to grow organically, as well as valuable patents,” he argued.
“My concern is as much as this can help it doesn’t solve the biggest problem facing Windows Phone and Windows 8 on tablet and PC – it doesn’t have enough apps to make a compelling platform.”
Tellingly, Microsoft only devotes one bullet point on the app ecosystem in a mammoth 27-slide presentation explaining its strategic rationale, he pointed out.
Ma added that the deal could end up alienating more OEM partners.
“The whole debate Microsoft got into when it released Surface was that its hardware partners like Acer said it was stepping on their toes. This will raise questions over whether this is more salt in the wounds for them.”
As for smartphone OEMs well Windows Phone has very few of those beyond Nokia anyway so it will step on fewer toes, he said.
However, I’d agree with Canalys VP research Rachel Lashford that it’s not exactly going to attract any more into the fold either.
“It reminds me of a decade ago when Nokia owned Symbian and tried to license it out but it didn’t work out,” she told me. I can’t think of many OEM vendors would fancy going head-to-head with Microsoft on Windows Phone now.
As for Asia-specific repercussions, well I’ll be taking a look at those – and there should be some given Nokia’s legacy in India and Microsoft’s desire to crack China – in my next post.
I have less than pleasant memories of the rugby scrum at Computex that formed after master showman, Asus chairman Jonney Shih, took the wraps of the Padfone.
“Is it a laptop? Is it a phone?” he teased, unaware that the vast majority of the audience couldn’t make an informed decision because of being unable to see anything past all the sweaty fanboys standing on their chairs.
It all came flooding back at the French Window, a swanky restaurant venue in the IFC Mall, on Thursday night. To describe the scene for you: lots of people talking over Nokia’s spokesperson and the over-exuberant local media star roped in to present the devices, no-body drinking.
After some barely audible back and forth and a play around with the new Windows 8 Phones, it was time for the money shot, namely the part when three attractive, scantily clad female models come on stage to hold the devices for the cameras … at perfect boob-height.
So does Nokia have much of a chance with the Lumias? Well I gave up trying to fight may way to the demo area, but smartphone fondlers in the media regard it as one of Nokia’s best for years: great build quality, blisteringly fast processor and superb camera, if a little bulky.
Wireless charging, which was demoed at the event, will also be a bonus and, of course, it comes with Windows Phone 8.
I like Nokia, I really do, and would love the European tech giant to get back on track with this one, it’s just that with so much competition, and with so many smartphones these days offering specs which are so similar, I wonder if it will be enough, especially in the hyper competitive China market.
If you’re a Windows Phone fan, happy days, if not, you may well be minded to stick with what you know.