Microsoft-Nokia: A Tale of Two Broken Business Models

The launch of Lumia(Nokia Smartphone) in the market is showing a pivotal point in the Microsoft-Nokia partnership. But how successful will it be?

Nokia and Microsoft both fighting their battles: Microsoft is protecting its PC software licensing business. Nokia, on the other hand, fights to stay alive as a handset manufacturer, grow in earnings of the Smartphone business. The common thing: Both were disrupted by fundamental shift in the mobile industry.


The origin of competition in software addition to mobile has changed. The once-successful business models of Microsoft and Nokia can no longer make sure its profitable growth. The partnership between the two companies cannot change that. Google once cynically said that two turkeys don’t make an eagle. Or do they?


Microsoft: A PC company in the mobile age

Reports about “Microsoft making more money on Android than on Windows Phone”, to make a popular heading, but miss the point. Microsoft’s mobile plan is in relation to dropping ecosystem churn. Every iPhone developer represent a developer who adds value to Apple network and not Microsoft’s.

In January 2012, Microsoft Windows & Windows Live, Server & Tools and Business division is dependable to generate 75% of the revenues. The company reported weaker than-expected PC demand in the last quarter of 2011. Revenue of Windows & Windows Live Division fell 6 percent year over year (and this is during the lucrative holiday quarter!), and yet worse – operating income declined by 11 percent.


The company’s core business is challenged at multiple levels. iPhone and iPad users are gradually choosing Mac as their next computer – where as Mac success means less Windows licensing revenues. Furthermore, tablets are displacing netbooks and laptops, which were the hope of the PC industry until recently. 


Insisting on sailing upwind

With this partnership, Nokia and Microsoft persevere on sailing upwind with their sails flap. Combining two business model of the 1990’s will not help the two companies get back their positions in the new technology world order, from other by companies with Internet-age business models, like Apple, Google, Amazon and Facebook.

It seems, the simple way for Nokia and Microsoft would be the acquirement of Nokia’s Smartphone business by Microsoft.