Microsoft and Nokia are betting on Lumia success

By Will Goodbody, Science and Technology Correspondent


It’s been an eventful and arguably a disruptive week in consumer technology.

First came the news on Tuesday of Microsoft’s purchase of Nokia’s phone division for €5.4bn. A tie-up that could lead to a more credible third force in the global smartphone market share war.

Whether you like Windows or not, few could argue with the proposition that Microsoft knows how to develop market leading software. But for some time, the multinational giant has been belatedly and desperately struggling to radically adapt its business model away from one based around increasingly redundant PCs and laptops, towards one focused on the burgeoning tablet and smartphone market.

Nokia, on the other hand, was once the doyen of phone handset and hardware manufacturers, with a massive global market share. But it too failed to adapt and develop its devices and operating systems to the smartphone reality, leaving it increasingly weakened in the face of the rampant rise of Android and iOS. Indeed, Nokia now accounts for 14% of global mobile phone sales, according to Gartner, and that share is in rapid decline.

The adoption by Nokia of the new Windows mobile operating system in 2011 has helped stem the ebbing tide a little. But when it comes to developing high-end cutting-edge consumer electronic devices in a crowded cut-throat market, the closer the ties between the partners the better. And Microsoft has clearly taken the view that it wants the closest possible integration with Nokia, by bringing its phone division in-house.

For Nokia too, such a radical restructuring was becoming increasingly inevitable. So perilous was its position becoming, that some observers had even predicted that it might only have months to live. After several attempts at plastic surgery, the only realistic option left to stop the gangrene was amputation, and in the end it decided to cut off its head.

The question now, is what happens next? The Nokia Lumia range of smartphones, which run the Microsoft mobile OS, is growing in popularity in some markets. Particularly so in Europe, where according to Kantar Worldpanel it has boosted the Windows Phone OS to a 10% market share in the last quarter in the five biggest European markets. That momentum must be maintained.

The integration of the 32,000 Nokia employees into Microsoft will take until next year, to complete. In the meantime, both units will have to aggressively up their game, both in relation to hardware development and marketing, if Microsoft is ultimately to continue the upward trajectory. If it gets it right, it could help save Microsoft from a long, painful decline and rebalance the market away from the dominance of Android and iOS. If it gets it wrong, the godfather of mass consumer computing will be in considerable trouble.

Then on Wednesday came the unveiling at the IFA electronics show in Berlin of the Samsung Galaxy Gear smartwatch. After months of unrelenting hype, wild speculation and baseless rumour, the product itself proved a little underwhelming. An extension of your smartphone (has to be an Android smartphone and for now at least a Samsung hig end handset) on your wrist, there was little surprise to be found in its features. It can be used to make calls through the phone, view alerts, run apps, take pictures and play music on your phone. But with no SIM, it will effectively be pretty useless when not connected to a handset.

But in some ways it was the device’s launch that was more important, heralding as it most likely will, the start of a massive push by electronics manufacturers towards a wearable tech revolution. Sure, there are already many wearable smart devices on the market, like Sony and Pebble’s smartwatches. We all know too about Google Glass. But Galaxy Gear will arguably be the first mass produced, wearable technology device to be marketed by a company which has the critical mass, financial muscle and reputation to make the concept a success. And if, as expected, it is soon followed by the launch of an Apple iWatch, the revolution will undoubtedly be underway. A revolution which may in time prove disruptive.

And finally, we had the unveiling by Sony of the QX series of lenses. These are standalone lenses, similar to those found on digital SLRs, which can be physically placed in front of the phone’s camera lense, and wirelessly integrated into its operating system. Effectively, they will convert a smartphone into a DSLR. Will it mean the end of such high end digital cameras? Unlikely. But the concept is likely to prove the final nail in the coffin of digital compact cameras. Already in decline due to the ever improving quality of smartphone cameras, the introduction of near professional quality lense technology that can be added to the smartphone when needed, will surely sound the death knell for compacts. And arguably cement an ongoing disruptive phase in the consumer camera market.

So plenty of proof then that a week can be a very long time in technology. And with Apple due to unveil a series of new products next week, including perhaps the iWatch, next week could be pretty long too.