Despite Microsoft CEO Steve Ballmer's best efforts, Nokia's stock has dropped nearly 20 percent since Nokia CEO Stephen Elop announced plans to abandon the Symbian operating system and align with Microsoft's Windows Phone 7 platform.
Microsoft promised to accelerate development of the Windows Phone 7 ecosystem, and has planned a major upgrade that offers Internet Explorer 9 and cloud support, more third-party multitasking, Twitter integration, and more. But Ballmer's announcements at the Mobile World Congress in Barcelona, Spain, doesn't seem to be convincing Nokia shareholders or employees that Elop made the right bet.
"Particularly for business users, Windows Phone 7 provides an interesting and very powerful platform and user experience that is beautifully integrated with the world's most popular PC operating system and productivity software," said Charles King, principal analyst at Pund-IT Research. "But part of the problem is that you can have a great technology, but you need buy-in from a significant part of the market. Companies and technologies have gotten left in the ditch time and time again in the computer industry."
De Facto Control
At this stage of the smartphone market's evolution, conventional wisdom and market wisdom clearly lie with Apple's iOS and Google's Android platforms. Even Research In Motion with its BlackBerry OS is ahead of Microsoft in the smartphone game right now.
King said Nokia, even with all its problems, is still the largest handset maker in the world, so throwing its efforts behind what is essentially the fourth-most-popular smartphone platform is questionable.
"Nokia hired an executive who was deeply invested in Microsoft to run the company. And Nokia's new American operation has a company president that's also from Microsoft. So if this is not something that the board of directors expected, then what the hell were they thinking?" King asked.
"There were rumors years ago that Microsoft would find a way to buy Nokia and buy its way into the smartphone market. From a monetary and regulatory standpoint, that seems unlikely. Having two deeply experienced Microsoft veterans basically in charge of Nokia now has given Microsoft something of what you would call de facto control over Nokia. But it doesn't sound like either the rank-and-file workers or the company shareholders are buying into the idea enthusiastically."
Will Nokia's stock keep tumbling in a shareholder revolt? The fate of the Nokia-Microsoft deal depends, in part, on how the market reacts over the course of the next few days. King said if the stock goes into a death spiral, which isn't something he is expecting or would support, then Nokia is going to have to take a step back and rethink the new strategic direction.
Meanwhile, Microsoft is pushing hard to change the negative momentum.
"Microsoft is a company that's sitting on $40-plus-billion of cash right now. So they are a well-heeled partner, and a well-heeled partner is a good thing to have in today's market," King said. "I think over time the deal could be beneficial to Nokia, but the board and the executive group seem to have misread the probable outcomes of the announcement pretty drastically."