Danske Bank has re-ignited speculation that Microsoft will buy Nokia, or more precisely Nokia’s mobile phone operations. It isn’t out of the question, but I don’t buy the “where there’s smoke there’s fire” argument that some are making. Back in the 90s a rumor would hit every few months that Microsoft was going to buy Sybase. Not only weren’t we in talks to do so, but we weren’t even discussing the idea internally (ok, we did discuss it once but that was not one of the times that rumors surfaced). So I personally know that people invent these things, either to manipulate a company’s stock or in hopes that their total guess becomes reality and they can be “analyst of the year” or win a Pulitzer Prize, or some similar motivation.
Microsoft will acquire Nokia if, and only if, (a) it determines that the rest of the ODMs are beyond hope of ever sufficiently backing Windows Phone and (b) Nokia has proven that it can produce phones that will beat the combined Apple + Android ecosystem. Add Google’s purchase of Motorola to the mix, so that Microsoft won’t be the company that is introducing the notion of being both partner and competitor into the mix, and you have a formula that might appeal to Steve Ballmer.
The dynamics have indeed changed enough so that, unlike previous postings, I’m no longer a total skeptic of the acquisition. Acquisitions are messy and often unsuccessful affairs. Even in the best case Microsoft would have to worry that attempting the acquisition would stall Nokia’s progress for a year or more. And that would be fatal. So some skepticism remains.
I’ve recently commented about how neither Samsung nor HTC are showing leadership on Windows Phones (i.e., best features introduced first on Android phones, Windows Phones are warmed over Android designs). This was true for both the generation introduced with Windows Phone 7 (pre-Nokia/Microsoft relationship) and the one recently introduced with Windows Phone 7.5 (post-Nokia/Microsoft relationship), so we know this isn’t simply because of Microsoft’s relationship with Nokia. Combine that with how little Samsung and HTC seem to be doing to market their Windows Phones (something that Microsoft reportedly gave them a lot of money to do) and I imagine Microsoft could once again be questioning their reliance on third-parties.
Next, look at the success Nokia is having with the Lumia family. Even at this early stage it is clear that Nokia can build devices that stand up to Apple (and the Android cartel). As Nokia’s momentum around Windows Phone builds I have little doubt that the results will be spectacular.
In other words, it may be that the conditions wherein Microsoft would seriously consider acquiring Nokia’s mobile phone operations have been met. Microsoft could do the acquisition and continue to offer Windows Phone software to other manufacturers. But now instead of Microsoft counting on them to make Windows Phone a success it would fully take its fate into its own hands. If Microsoft is able to achieve success than other manufacturers will ride its coattails. If not, well what other manufacturers do really doesn’t matter. For those who think the scenario of being both competitor and partner (or at least supplier) is far-fetched consider this: If Apple were to license IOS don’t you think that Samsung, HTC, and a dozen others would very quickly produce IOS devices despite having to compete with Apple’s iPhone?
On a closing note, if Microsoft is going to acquire Nokia then the recent changes around Windows Phone leadership make even more sense. It could be that Andy Lees is prepping to lead the acquisition and integration of Nokia. But that is entirely speculation on my part.