Friday, December 14, 2001

Nokia vs. Microsoft Microsoft dislikes divided technological leadership, and since it now views all digital information as fair game, this means it wants Windows in all mobile phones. Nokia and company saw this ages ago, which is why they formed Symbian, a consortium dedicated to producing a non-MS OS for phones.

The press and investment community has been blathering on about cellular handsets getting commoditized away like PCs, but I think this is unlikely. Essentially, handsets are squeezed between two forces: carriers and operating system. In Europe, the GSM standard and swappable SIM cards in Europe mean that carriers have essentially been commoditized away--at least to the extent governments will let them be. Users are free to switch from one carrier to another, and to be honest, so long as coverage is reasonable no one cares who the carrier is. Complete interop (both voice and SMS) also means there are no demand side externalities, so the handset market should do fine with multiple major players. On the OS side, both embedded GNU/Linux and EPOC (Symbian's OS) represent good commodity OSes (without platform strategies underneath them) that are preferable to getting into bed with the Beast. Finally, although Microsoft might want to believe otherwise, there's little tying cellphones to PCs or servers--voice and SMS run on non-IP networks.

In Japan, the government has the entire vertical sown up courtesy of DoCoMo, and the fragmented standards in the US means that carriers have commoditized away handsets and OSes. The .NET based services Microsoft hopes will loop in phone users don't mesh with customer needs, and will fail. No market demand AND no way to leverage established monopoly means no place to play for Microsoft.

Of course, this doesn't mean that market saturation might not drive down Nokia's envious 15% margins. As Ollila looks for more revenue, it'd do better selling hardware with gold-plated integrated software on commodity OSes.


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