Nokia CEO Welcomes Possibility of Microsoft Surface Smartphone Discussion

[Grant Hatchimonji]

Nokia CEO Stephen Elop said during an investor call earlier today that a Microsoft Surface smartphone would be a "stimulant" to the Windows Phone 8 ecosystem.

Read the full content of this Article: Nokia CEO Welcomes Possibility of Microsoft Surface Smartphone

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[Ed Hardy]

Elop is going for the "a rising tide lifts all boats" theory. And I guess I can see that. I can understand large organizations not wanting to invest in a mobile platform if it's only backed by one or two device makers.

I realize that's not the way it worked with RIM and BlackBerry, but RIM is probably showing companies the problems of a single-company ecosystem. If the device/software maker goes under, so does everyone's investment in its devices.

[Mitlov]

On one hand, both companies would benefit from a Surface Phone, so not a lot of conflict there.

On the other hand, I'd be a little annoyed with Nokia if I was Microsoft. Microsoft clearly wasn't planning from day one to have a Surface Phone, or else it would've been there at the launch of WP8, like the Surface RT is leading the charge of Windows RT devices. Microsoft pumped a ton of money into Nokia to save that company, I'm sure with the understanding that Nokia would be the vanguard of the WP8 push. The fact that the Surface when it was originally unveiled was most often shown with a Nokia blue touch-cover shows that MS was envisioning the two companies working side-by-side. And the Lumia 920 created the sort of interest to be a vanguard device for WP8...it had a potential to draw converts from the other OSes, instead of merely satisfying people who had already chosen WP8 as their OS.

...and then Nokia signed a six-month exclusivity agreement with AT&T (confirmed by a leaked AT&T employee training video), eliminating any chances of the Lumia 920 being the vanguard device of WP8 in the market as a whole.

Declaring the HTC 8X (which is basically a One S with brightly-colored plastic, nothing revolutionary and nothing giving WP8 a competitive advantage over other OS's hardware) the "signature" phone of WP8 was damage control. Building a Surface Phone to be WP8's vanguard would be damage control as well.

I can't help but think that some people in MS are saying "we bailed you out for THIS?" I think they'll probably build a Surface Phone, because it's their best bet going forward, but I have to agree with that sentiment.

[Ed Hardy]

Mitlov, I agree heartily, and I've been meaning to write an editorial on this topic. There is no way Nokia's Windows Phones are ever going to develop any wide appeal if Nokia keeps locking them into exclusive contracts with carriers. Few people are willing to switch telecoms to get a device, no matter how sweet. No smartphone that's available from only one carrier is ever going to reach its potential.

Apple tried this for years, allowing only AT&T to offer the iPhone. This is ne of the main reasons why Android passed iOS in the market -- Google's offering was much more widely available.

[Varjak]

I think the iPhone actually disproves your theory, since many people did switch; but that was a fairly unique situation. There wasn't as much competition and now people can get a lot of what only the iPhone once had on other OSs from other carriers.

BTW, Nokia got HAMMERED yesterday/today (time zones) with their earnings and the stock price.

[Mitlov]

I think the iPhone actually disproves your theory, since many people did switch; but that was a fairly unique situation. There wasn't as much competition and now people can get a lot of what only the iPhone once had on other OSs from other carriers.

I don't think the first-gen iPhone disproves the theory, because (as you note) the first-gen iPhone was in a unique market situation that doesn't exist today. At the time, it was the only consumer-oriented smartphone on the market; nothing else out there offered the sort of style, user-friendliness, etc that the iPhone offered. But with the iPhone 5 and Galaxy S3 on every major carrier and carrier-specific models getting hammered sales-wise (HTC and Motorola, I'm looking at you guys), it's a completely different landscape in 2012 than it was five years ago. The Lumia 920 has some unique features that might cause a few people to switch carriers (i.e., the camera), but it's not the atom bomb for the industry in 2012 that the first-gen iPhone was in 2007. So different rules apply.

And on the other hand, further proof that Windows Phone 8 won't be able to dramatically improve market share with AT&T-exclusive devices is...Windows Phone 7. The Titan II and the Lumia 900 and the Samsung Focus S (the three "good" phones that ran WP7) were all AT&T exclusives; Verizon, T-Mobile, Sprint, and US Cellular got decidedly ho-hum devices, and while WP7 has pretty good owner satisfaction, it never made a huge impact market-share wise.

EDIT: One other way to look at it. I'm pretty loyal to Windows Phone, and if I won't switch to AT&T for the Lumia 920, how many people will?

BTW, Nokia got HAMMERED yesterday/today (time zones) with their earnings and the stock price.

Not really. Five day ago they were at $2.58. Two days ago they were at $2.95. Right now they're at $2.74. They've been hovering around the upper $2's ever since the Lumia 920 was unveiled.

[Ed Hardy]

I think the iPhone actually disproves your theory, since many people did switch.

Some people switched, but not nearly enough. Instead, millions of Verizon customers bought Droids. Apple had to give up its exclusive deal with AT&T because its strategy wasn't working. Apple's misstep is the reason why Android is the top-selling mobile platform in the U.S., even though the iPhone had a headstart. This isn't a strategy Nokia should be emulating.

[Adama D. Brown]

Some people switched, but not nearly enough. Instead, millions of Verizon customers bought Droids. Apple had to give up its exclusive deal with AT&T because its strategy wasn't working. Apple's misstep is the reason why Android is the top-selling mobile platform in the U.S., even though the iPhone had a headstart. This isn't a strategy Nokia should be emulating.

Not to mention, we should remember how when the iPhone launched on Verizon, they sold something like 1 million iPhones in the first two or three days of pre-orders. That would be big for one carrier even with the iPhone 5--Verizon has only sold 650,000 of those so far. But Verizon's first launch was with the same iPhone 4 that had already been available on AT&T for six months. Normally, a six month old smartphone is barely rated higher than day old leftovers. That gives a pretty good indication how much of the subscriber base won't change services in order for a shiny thing they really want, not even an iPhone.

[Varjak]

Ed Hardy, what was Apple's 'strategy?' Are you saying they never planned to open up the iPhone to other carriers? I sincerely doubt that.

Mitlov, the point is that now that you can get basically the same functions on any carriers, means that WP8 has to be so far and a way better to bring the kind of business the iPhone brought to ATT, which was WAY beyond even the most rosy projections. I don't see that happening. I AM NOT predicting failure, only that they are most likely going to have to be happy with being a player at best in the smartphone OS market.

I'd also argue that even a millions sales (and it's a good point about the phone being already out for a while, not to mention that it was markedly inferior on Verizon and still is to a degree) is not huge for Verizon. And the 650K number (I'm taking your word and stats) is actually kind of shockingly low.

[Adama D. Brown]

Ed Hardy, what was Apple's 'strategy?' Are you saying they never planned to open up the iPhone to other carriers? I sincerely doubt that.

Remember, when the iPhone was first released, Apple signed a 5 year exclusivity deal with AT&T. Considering that most exclusivity deals are 3 or 6 months, that's an insanely long time. That might not prove that they NEVER planned to offer it through other carriers, but it's pretty strong evidence that it wasn't an interest for them. And there were reasons for them to do that that make a sort of sense; that way, they could manufacture a single GSM version of the iPhone and sell it around the world, rather than having to manufacture a special CDMA version just for the US. However, the fact remains they had a huge number of buyers who couldn't or wouldn't switch.

I'd also argue that even a millions sales (and it's a good point about the phone being already out for a while, not to mention that it was markedly inferior on Verizon and still is to a degree) is not huge for Verizon. And the 650K number (I'm taking your word and stats) is actually kind of shockingly low.

I should correct that, I misread the article I looked up for information; 650,000 was actually for the first 10 days of iPhone 5 sales on Verizon. Even so, it makes the point that there was a huge pent-up demand for the iPhone on other carriers.