Just the last couple on the dance floor...or something more serious?

This week Microsoft and Nokia announced plans to form a broad strategic partnership that would mean Nokia would adopt Windows Phone as its principal Smartphone strategy integrating all the associated components including the Bing search engine. Conversely Microsoft would integrate Nokia’s map service into its own and would utilize Nokia’s extensive billing agreements making it easier for consumers to buy Nokia Window based phones.

With ComScore claiming that 50% of Americans will own a smart phone by the end of 2011 this seems like a smart move from two titans not used to playing second fiddle in the markets they operate. But between Apple’s iPhone, RIM’s Blackberry and Google’s Android operating system, both Nokia and Microsoft have struggled to keep up in one of the fastest growing and changing markets. Indeed Microsoft’s mobile OS powers only 14% of smart phones in the US and even less are a considering a Microsoft OS for their next upgrade.

So will this partnership change the current trend and give Microsoft and Nokia a stronger foothold in what is shaping up to be an interesting battle for dominance in the smart phone market place.

To recap, Apple revolutionized the smart phone industry with the launch of the iPhone back in 2007, gradually overtaking RIM’s Blackberry as the ‘must have’ device with only businesses keeping RIM in contention. Before the iPhone smart phones were seen as the domain of the business user and as such RIM’s Blackberry was very business rather than consumer centric. But despite the hype of the iPhone 4, Apple’s recent march to prominence seems to have been halted mainly due to Google’s strategy of making their Android OS open source. According to Neilson, Android accounted for 43% of all new smart phones sold in the last 6 months, and now account for a similar market share as both RIM and Apple. Indeed as the chart below shows RIM continue to lose market share, with Apple holding steady but Android climbing fast.

It is too early to tell the impact in the US of the iPhone now being available on the Verizon Wireless network, but worryingly for Microsoft is that not only are they a long way behind but they are falling further.  Enter Nokia who have also seen better times and now find themselves trailing behind Samsung, LG, Motorola and RIM, and worse still heading in the wrong direction.

So the question is can both companies be more successful than they have been individually? On the face of it this seems like an ideal partnership with both companies offering complimentary skills, and having an opportunity to save significant costs. But with any strategic partnership often success can be more dependent on chemistry than pure economics. Nokia’s CEO, ex Microsoft Executive Stephen Elop, in a letter to employees describes the company’s position as the equivalent of standing on a ‘burning platform’.

So is this simply a final desperate act of self preservation, or will necessity really prove to be the mother of invention? It seems clear there is room in the market for a middle of the road solution. Developers claim Apple control their ecosystem too tightly which may restrict their ultimate penetration capacity, whilst Android has the opposite challenge of maintaining version control to ensure the OS remains cross functional for Apps over the long term.

But the ultimate factor may be how the two cultures work together, and whether such a partnership of convenience can really be successful without it being consummated. There is a European culture of living together but will that suit the America propensity for marriage? I suspect this announcement may simply be the first date on the road to something more permanent for both companies, either marrage in the shape of a merger or children in the form of a joint venture.  As I suspect that only with a greater level of commitment from both companies will they be truly able to meet the challenge of competing with the current industry titans. And if that happens I would not bet against Microsoft who have a strong history of impressive comebacks.

If it's not an iPhone Why would I want it?

xtranormal iPhone parody

The business headlines this week have been dominated by Steve Jobs decision to step down as CEO of Apple, with Tim Cook the current COO taking over the reigns. Jobs says he will still retain input to all key decisions but the omission of a targeted return date as well as the lack of detail around his current illness have led some people to speculate he may not return.

As a result of the decision, released on a day the markets were closed and the day before expected positive financial results were posted, Apples shared dropped about 8% in European markets but then seemed to bounce back ahead of US markets opening on the anticipation of a positive firts quarter earnings report. The question that remains though is what is Apple, if anything, without Steve Jobs?

In most scenarios this would be ridiculous question. Apple has 47,000 employees and Jobs himself did not design, manufacture and distribute the iPod, iPhone, iMac and iPad. Duff McDonald writes in CNN Money.com that “Steve Jobs is a wonder, but he is not a one-man $300 billion corporation. No one is.” And whilst this is true I suspect the reason most commentators are on to something here is less to do with Jobs himself and more to do with the substance of the legacy he is leaving behind.

As I posted last summer Apple relies more on innovation for its success than most other companies. Already there is a hungry pack chasing with alternative smart phones, light weight laptops and ergonomically efficient tablets. You only have to view the “iPhone vs. HTC Evo xtranormal parody” which got more than 11 million views to appreciate that much of Apples success is based on good marketing that encourages us to buy what we ‘want’ rather than what we ‘need’.

And importantly key to that innovation and promotion is Jobs himself. As I mentioned in my previous post Apple were stagnating before Jobs came back and he reinvigorated their product line and restored the brands ultra-cool status.

Whilst Jobs is not the ‘brick and mortar’ of the company he is the award winning leading man. The question is does Apple have another showman in the wings to ensure the ratings lead continues? There seems to be enough current momentum in the short term but only time will tell if Apple after Jobs can retain the same cache beyond that.