Nokia’s Death Wish in HP’s Shadow

The last week included major strategy announcements from two troubled cellular phone makers: Silicon Valley’s Hewlett-Packard and Finland’s Nokia. If the machinations of phone producers were a tragedy, the present act would surely be near the climax, complete with the start of a reversal of fortunes for an unlikely player and the flawed hero making a move cementing his death.

Whether Nokia will still be a going concern in ten years is not really the question. Rather, the question is whether Nokia will ever have another day in which it can create aspirational, trend setting products rather than existing primarily as a producer of commodity phones people may settle for.

Nokia CEO Stephen Elop’s decision to bet Nokia’s smart phone chips on Windows Phone appears to condemn Nokia to the commodity phone bin. If a dozen other companies can make Windows Phone devices and, by and large, the devices are the same in functionality (per Microsoft’s guidelines) why would anyone pick Nokia? When a bored engineer created a fictitious group of investors who allegedly were promoting a “Plan B” to avoid Nokia’s commoditization, fiction truly did seem more real than reality.

The path Nokia has now adopted follows a story that has already played out with the past iteration of Windows Mobile. HP and numerous other manufacturers threw significant resources behind Windows Mobile, but they never went anywhere particularly grand with that platform. Meanwhile, a new player – Apple – appeared from off stage and stole pretty much all of Windows Mobile’s lunch.

Microsoft and HP both dealt with this in their own ways. For its part, Microsoft completely overhauled Windows Mobile into Windows Phone, a much more attractively, starkly different product that OFB found to be a fine competitor to Apple’s iOS and Google’s Android.

But Windows Phone is hardly ideal from a manufacturer’s standpoint. Because Windows Mobile fragmented into many different user experiences, Microsoft took firmer control of its new product, mandating that much of the experience be the same regardless of the manufacturer of the phone. This makes a great deal of sense for Microsoft, who wants people to really like the Windows Phone platform as the Windows Phone platform. But, that requirement leaves little room for a given manufacturer — say, HTC – to distinguish its Windows Phone from any other manufacturer’s. When we reviewed an HTC Windows Phone, the review was mostly about the platform rather than the individual phone.

This lack of differentiation is exactly why manufacturers started taking liberties with Windows Mobile, customizing it to the point where many Windows Mobile phones’ experiences were so different no normal owner would recognize their commonality. Thus, we could easily say, an HTC Windows Mobile product was better than a Samsung one. In practice, while this did differentiate manufacturers, the fragmented platform situation only served to make Windows Mobile as a whole even less appealing to consumers. That Nokia has a special dispensation to customize Windows Phone, then, is hardly a certain advantage.

PDA and smartphone pioneer Palm, Inc. knows Nokia’s story well. When Palm’s legacy Palm OS finally became more of a liability than a future asset to the company, that company made a big splash by adding Windows Mobile phones to its line. That unfortunate decision did little to slow the approaching death of the company – only a new in-house OS, WebOS, offered some solace. While WebOS did not arrive soon enough to save the company as an independent organization, it did at least make Palm worth acquiring.

HP threw a significant amount of money into buying Palm last year to obtain the company’s promising WebOS platform. WebOS offers HP a chance to chart its own course, similarly to how Apple has done with the iPhone. Much of the iPhone’s success can be attributed to its tightly integrated experience in which the hardware and software are designed as one.

HP’s previous forays in the mobile space had taught it that depending on a third party to provide the operating system left it with a generic phone (at best) or a generic phone with a fragmented, customized interface (at worst).

HP has learned well and with its aggressive WebOS product plans, the future looks very bright for perhaps the worthiest competitor to Apple’s iOS.

That brings us back to Nokia. The company has managed to preside over an inexcusable lack of stewardship for the world’s most popular smartphone platform, Symbian, that left Nokia’s in-house platform in a tailspin with a poor user experience, unrefined touch interface and virtually no future. In a market much larger than the PC market going forward, Nokia’s mismanagement of Symbian is far more embarrassing than Apple’s near fatal missteps with the Mac in the 1990’s.

Many called Apple at the time to switch to Windows. Some of Apple’s competitors that had their own in-house platforms did. Most of those competitors closed shop while Apple has prospered by building a new, better in-house platform for its future.

If Nokia’s Elop were a good student of history, he would observe what happened in the past with Windows Mobile and take heed. If he were a great student of history, he’d also note Apple’s response in a situation not unlike Nokia’s and act accordingly.

Nokia’s future depends on charting its own course by either putting someone with vision in charge of Symbian and reworking it into a more appealing platform (as Microsoft did to create Windows Phone) or start over and build a new platform (as Apple did with Mac OS X and Palm did with WebOS).

Nokia on its present course stands to lose the very things HP just paid a billion dollars to gain: control over its destiny. It will now be at the mercy of Microsoft’s ability to deliver appealing upgrades and the naïve hope that it can convince consumers a Nokia Windows Phone is better than any of the other Windows Phones on the shelf. That should not seem an attractive prospect to a smartphone pioneer with huge resources.

Often the tragic hero doesn’t have to die. The rightful solution is right in front of him. But, filled with hubris and an inability to understand the bigger picture, he trudges ahead to his fate while someone else takes what could have been his.

This may very well be the week HP gained the story Nokia was meant to live.

Timothy R. Butler is Editor-in-Chief of Open for Business.