Nokia and Microsoft – so much mobile possibility…so much incoherence.
Both Nokia and Microsoft reported their earnings this week. Though I won’t go into any specifics on the earnings themselves (there are numerous other places for that) it is well worth pointing out that Nokia’s mobile device share has slipped again, from an overall 35% to 31% share of the market. Microsoft, in the meantime, continues to successfully run three giant businesses; and a collection of much smaller ones – among which is found its mobile products – that somehow hold far more sway over how the company’s future is perceived than the gigantic ones do.
Nokia merely continues to generate speculation about its mobile OS future. CEO Stephen Elop left plenty of clues on the table about upcoming changes – and it’s possible we’ll hear concrete details on February 11th – a day that could become a marker for either the first day of Nokia’s true decline, or the first day of an Apple-esque recovery.
Microsoft continues to deliver huge revenue streams through its mature businesses – Windows, Office, and the Server teams are all Fortune 500 companies operating underneath the Microsoft banner. The problem with these enormously successful companies is that they are DULL – in fact, dull, dull, dull – they no longer capture the imagination of anyone – with the exception perhaps of the IT elves that appreciate how well-oiled the enterprise products they put out are and how well they work in the enterprise.
Financial analysts and investors are beginning to look to these core Microsoft capabilities as a dividend play – if only Microsoft would cooperate and start paying out meaningful ‘regular’ dividends. Another one time special dividend sometime in the future isn’t an answer – it leaves far too many people with no way to utilize MSFT for financial planning, and kills the stock. Speaking of which, as everyone knows, MSFT has not done anything since the dot com bomb – it has been stagnant in that $25 range for what now looks like forever – a decade (although those that got on the very short-lived $16 to $34 dollar ride a couple of years ago did OK).
So, with Nokia we are left with speculation – Android? MeeGo? Windows Phone 7? I’ve already put out thoughts on this that make a lot of sense, at least to me. We’ll see which way the wind blows on February 11th – I’m sure it will be a big ‘blogging about Nokia’ day.
With Microsoft we’re left with Kinect, which to its credit has managed to capture a few imaginations; we’re left with wondering why Microsoft appears unable to capture the mobile mindset; and we’re left with speculating not about how Microsoft is going to win the tablet wars, but rather with why Microsoft will no doubt lose this vital war.
Tablets represent an urgent do or die war? Yes, they do.
There is one very simple metric that is critical for Microsoft in relation to mobility and tablets: Every tablet sold, whether for consumer or enterprise use (especially for enterprise use) means one less PC (desktop or laptop) that will be sold. Period. The vast majority of PC owners are not computer junkies. Computer junkies (developers, ultra power users, etc) make up a very tiny percentage of the population.
Most PC users are ‘convenience users’ who simply want Internet, Web – and increasingly – Facebook access. All of these are what tablets are already excellent at. As PC sales decline, so will the Windows side of Microsoft’s business decline. Once the PC sales decline begins to accelerate in the second half of this decade, Microsoft’s Windows business will directly follow suit.
Microsoft’s lack of a coherent tablet strategy (something I’ll take a closer look at in the very near future) – coupled with what some of us perceive as an ‘unendingly’ incoherent mobile OS strategy – is likely to doom Microsoft’s Windows business.
But what does ‘doom Microsoft’ mean here exactly?
The answer comes down to capturing the imagination of young people: Kinect is a minor victory; Mobility is a major ongoing failure. Microsoft is no longer a mover and shaker. Such is Steve Ballmer’s dilemma…Steve is not the CEO that is going to fix this.
As a mature and entrenched set of businesses Microsoft does exceedingly well. The next enterprise generation of cloud computing will continue to drive enormous revenue for Microsoft, even as Windows licensing sales on individual PCs declines. Microsoft rightly points out that cloud computing, not mobility, is the next big revenue generator.
But…enormous revenue from cloud products is a pure ‘MSFT as a dividend stock’ play. It will capture no young person’s imagination – the prime motivator in driving forward the stock price of any company – mature or otherwise, especially in a consumer-dominated business such as mobility. My biggest concern is that Microsoft is also on its way to blowing the enterprise mobility market.
At the beginning of this month I posted the following: A Look ‘Back’ at Both Steve Ballmer & Nokia on Android – it Doesn’t Get Any Funnier Than This! I posted it in anticipation of possibly saying at the end of the month, following their earnings calls, that both have managed to put the thinking expressed in that post behind them. Alas, it’s even funnier now.
Nokia and Microsoft – so much mobile possibility…so much incoherence.
∞
Tags: Android, Enterprise Mobility, Microsoft, Mobile Observatory, Nokia, Tablets, Tony Rizzo, Windows Phone 7, WP7
[...] why Microsoft is quickly evolving towards becoming a ‘dividend play,’ as I noted in my blog post from last Thursday. As Microsoft becomes a dividend play (and value stock, rather than a growth stock) it serves as a [...]
[...] out of reach. I also still feel, however, that Nokia and Microsoft continue to be kith and kin to Two Incoherent Mobile Ships Passing in the Night, as I noted in an earlier blog [...]
[...] out of reach. I also still feel, however, that Nokia and Microsoft continue to be kith and kin to Two Incoherent Mobile Ships Passing in the Night, as I noted in an earlier blog [...]