Microsoft, Nokia - the one we all saw coming

I think Bryan Glick at Computer Weekly summed it up best:

That's Microsoft and Nokia of course.

You'll be familiar with the basics by now: Microsoft buying up the devices business from Nokia for $7.2 billion in a move that almost everyone has been predicting for years, especially with former Microsoft exec Stephen Elop at the helm of Nokia.

Now Microsoft has more skin in the mobile devices market and Elop is back inside the Microsoft tent just in time for CEO Steve Ballmer's retirement do - timing really is everything.

Meanwhile the analyst community has shaken off its Labor Day weekend slumbers to try to work through the implications for the buy side.

At Constellation Research, Holger Mueller notes that there was a genuine need for Microsoft to do something in the face of tough competition

At the end of the day Microsoft needed to correct its weak position in the smartphone space - after all it competes with Apple and even more with Google - who either have an integrated device business - organically built or bought from Motorola. Understandable that the decision makers in Redmond did think that they could not compete.

One has to admire (to a certain point) the guts of the decision makers in Redmond. Despite record write down on inventory of the ill fated Surface tablet - they seem not to have enough of the device business. The belief of these decision makers must be that to succeed in the device space, Microsoft needs to have very tight control over software and device.

Microsoft had that with the Surface and did not / has not succeeded there. Now it will be more of the same - the question is - what will be the secret ingredient to make the device strategy a success now?

Mueller remains unconvinced:

The merger of two weak players does not make a strong one. But it certainly gives Microsoft more direct control and the chance to invest at will into the smartphone business.

The appetite for more device business and exposure is baffling - it was never Microsoft's strategy, the company has become market leader with the help of partners and the recent issues of the Surface tablet would not have encouraged many boards to do more device business and risk more of the same.

Ted Schadler at Forrester Research sees the acquisition as another step in Microsoft's journey from its roots as a pure software firm towards being a software-led, multi-product entity:

With that in mind, he concludes:

The risk of not owning a phone is much greater than the risk of owning a phone and pushing other manufacturers away. This is the biggest risk of all, though, because it's contingent on how the devices+services market unfolds.

Will pureplay manufacturers attempt to create their own software and ecosystems? Samsung and HTC and many others indicate yes. Or will they cede the services ecosystem to Google and Microsoft and just ship devices? Consumers will determine the answer.

I believe that it's too early to read the tea leaves, but I think the position of manufacturing pureplays is significantly weakened by this acquisition.

He also expects to sees a knock-on impact on the rest of Microsoft's strategy:

The quality of the Nokia Windows Phone experience will give more incentive to the Surface team to double down on Microsoft-owned tablets. Manufacturers like HP, Lenovo, and Dell will struggle to feel good about a Microsoft tablet even as they look for the best operating system for their own tablets.

All of this is good news for the buy side, he reckons:

For the CIOs I serve every day, this acquisition should bring comfort. Microsoft is doubling down on mobility, and that can only be a good thing for you. You can have more confidence that your Windows 8 tablet trials will be joined by a renewed Microsoft commitment to devices+services across tablets and phones.

It's a much needed deal for Nokia as well as Microsoft as TechMarketView's Richard Holway reminds us:

Nokia had nailed its flag to the Microsoft mast. From the largest global supplier of mobile phones, Nokia had sunk to a very poor also ran. From the largest supplier of PC software, Microsoft is a poor also ran in mobile.

So, in one sense, Microsoft needed Nokia as much as Nokia needed Microsoft.

But, in that age old jibe, ‘tying two bricks together doesn’t make them float’.

Gartner's Jack Santos takes the bluntest stand, declaring it

a match made in hell

but he concedes:

There’s still a chance. I have been playing with the MS Surface all weekend, and boy was that cool. The IT geek in me loved it. The consumer in me is still eyeing iPhones and Androids.

And the libertarian in me wants a three horse race, not two….

Verdict

I have to confess I was more excited by the appearance of the Apple iPhone invite!

The grim inevitability of Microsoft and Nokia coming together had been so widely articulated for so long that any element of surprise was long since past.

It says a lot perhaps that more people are interested in Stephen Elop as new Microsoft CEO conspiracy theories than anything else.