Enemies turn into reluctant bedfellows

MONEY MATTERS

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By Teija Sutinen
      The recently unveiled collaboration between Nokia and Microsoft is the most eyebrow-raising news item in the mobile industry so far this year, as it contains all the ingredients of high drama.
      The protagonists are two competitors, one of which is the king of the mobile handset market, the other the king of the software industry. Up until now, the situation has been clear: the royals are not fond of each other.
      Microsoft wishes to edge its own operating system into all possible devices, including wireless ones, even by force if necessary. On the other hand, Nokia has developed a separate operating system for mobile phones, and wants to keep Microsoft away from the mobile world.
      Now these two rivals have taken each other by the hand and patched things up. What is going on?
     
Nokia and Microsoft announced two cooperation arrangements at the 3GSM World Congress in Cannes. Nokia said that it would include Microsoft’s Media Player software as a standard component in its handsets.
      In addition to the cooperation in the field of music, Nokia revealed that in the future, its mobile handsets can be linked to Microsoft’s Exchange e-mail system, which is by far the most popular e-mail programme used by corporations.
      Nokia is thus admitting the fact that Microsoft’s Windows is dominant in the computers used by corporations. If the mobile giant is looking for new business opportunities among corporate users, it cannot afford to ignore Microsoft. For example, numerous companies are hoping for an easy and secure way for their employees to access work-related e-mail messages via their mobile phones.
     
In addition to Nokia, Microsoft has also faced the facts. Just last spring, Microsoft CEO Steve Ballmer boasted in a Helsingin Sanomat interview that Microsoft intends to win by a wide margin in the mobile arena.
      The bravado has gradually waned. Nokia has not been beatable with software, as the Finnish company has plenty of know-how on creating the brains of a mobile handset.
      Also, Nokia has proceeded in a different manner from Microsoft. It has not sought to protect the operating system developed by Symbian, its associated company, but the system has been licensed to various manufacturers. This has aided in widening the front against Microsoft.
      It remains to be seen whether the cooperation with Nokia will deliver a final blow to Microsoft’s dreams of penetrating the world of mobile operating systems.
      According to one theory, the only reason to switch to mobile phones that run on Microsoft’s software has been that the user wants a device that functions easily with his or her PC. Now Microsoft will lose this advantage, as Nokia’s wireless devices will now be able to connect with the Windows-based world.
     
Some suspect that Microsoft’s collaboration with a European manufacturer is a part of the company’s nice-guy campaign.
      In March of last year, the EU Commission slapped Microsoft with a fine of nearly 500 million euros for abusing a dominant market position. The legal process is still unresolved, as Microsoft has appealed the ruling in the EC Court of Justice.
      The U.S. giant needs some proof to provide to the EU that it is capable of cooperating.
      The competition authorities are sure to notice that Microsoft is embarking on cooperation with a company that has been openly critical towards Microsoft, particularly over competition issues.
      Late last year, a disgruntled Nokia left the Computer & Communications Industry Association because Microsoft used money to buy a deal with the organisation.
     
In the realm of two kings, there is a third interested party vying for the throne, Steve Jobs. He is the father of Apple, who has struck gold with the portable music player iPod.
      From Microsoft’s point of view, Jobs has received an annoying amount of publicity of late. Microsoft has no iPod of its own, and despite the Media Player, the company has no proper foothold in the digital music business.
      With the help of Nokia, Microsoft can eat away at Apple and prevent its brand from gaining ground. Who will want to drag along two portable devices if Nokia’s handsets can play music just as well as an iPod?
     
Nokia will benefit from the cooperation when mobile phone users switch to new and better models that include the planned music capability. Microsoft will also benefit when the music played via mobile phones or PCs is ordered from online vendors that employ Microsoft’s solutions, and is played with software it developed.
      This is the fundamental issue here - both sides stand to gain. By entrenching themselves more deeply into their own positions, both companies would harm mainly themselves.
      The strict limits that were defined for the cooperation reveal that the principle relationship between the two companies has not changed. They continue to be tough competitors who do not trust each other deep down.
     
Helsingin Sanomat / First published in print 6.3.2005


Previously in HS International Edition:
  Nokia to collaborate with Microsoft over digital music (15.2.2005)

Links:
  Nokia

TEIJA SUTINEN / Helsingin Sanomat
teija.sutinen@hs.fi