Handout #2
The New York Times (February 17, 2011)
For Microsoft and Nokia, Difficult Choices After Smartphone Deal
By KEVIN J. O’BRIEN
BARCELONA, Spain — With so much uncertainty surrounding Nokia’s smartphone alliance with Microsoft, one thing is becoming clear: Both companies will have to make some difficult changes, a top Microsoft executive said on Thursday.
The companies are still working out the details of the agreement they announced last Friday for Nokia to use Microsoft software in its phones, said Aaron Woodman, the director for mobile communications business at Microsoft.
Among the most basic questions include where to build a factory that will make the new phones, which chips to use inside them and how to adapt software and hardware that incorporates the two companies’ technologies.
“This is not a matter of spending a long weekend and matching our software to their handsets,” Mr. Woodman, who has been with Microsoft for 13 years, said during an interview at the Mobile World Congress, the industry’s largest convention being held here this week. In the auto business, he noted, it takes six years to get a car from conception to showroom floor.
The software business moves much faster, Mr. Woodman said, but he declined to shed light on when Nokia, the world’s largest cellphone maker, would start selling the first phones with Microsoft’s Windows Mobile operating system.
The Nokia chief executive, Stephen Elop, has promised “significant volumes” in 2012 and is pushing for the first models to reach the market later this year.
The alliance will test both companies, said Rajeev Chand, a wireless analyst at Rutberg, an investment bank in San Francisco that focuses on the wireless industry.
“I would call this a daunting challenge,” Mr. Chand said in an interview at the convention. Because of the thorny decisions that will have to be made quickly, Mr. Chand said, “Our general sense is that this is going to be truly difficult.”
Mr. Woodman said Microsoft’s cooperation with Nokia would bring significant benefits to both. With global data from Navteq, the digital map company owned by Nokia, Microsoft will be able to enhance the mapping service of its Bing search engine, he said. Bing has superior mapping detail in the United States but not abroad, Mr. Woodman said. Data from Navteq would put Bing on a par with Google Maps around the world, he said.
Nokia, which shipped 450 million phones last year, will use its leverage over suppliers to rapidly bring down the price of Windows Mobile phones, which have tended to be priced at the top range of the smartphone segment.
“Nokia’s ability to leverage its supply chain will bring Windows Mobile to a bigger market,” Mr. Woodman said.
For Nokia, Microsoft will be able to use its brand recognition to help improve the Finnish company’s market share in the United States, where it is in the low single digits, far behind Samsung, the market leader, Mr. Woodman said.
Nokia was the market leader in the United States as recently as 2002.
“I think we can help reintroduce Nokia into the North American market,” Mr. Woodman said.
Investors remained skeptical on Thursday, almost one week after Nokia and Microsoft announced their alliance. Nokia’s share price was trading at 6.65 euros, or $8.99, in Helsinki, Finland, 21 percent lower than it was before the announcement.
But Mr. Chand, the analyst at Rutberg, cautioned that investors might be overly pessimistic. Wireless companies want a third operating system to help them avoid becoming dependent on Apple and Google, the maker of the Android system adopted by numerous smartphone makers, he said. Although wireless companies attending the convention were muted in their support of the alliance, Mr. Chand said they would embrace the phones if they were good and if customers demanded them.
“You have to keep in mind that this is early days,” Mr. Chand said. “Remember that three years ago, there was no Android. The market sentiment is so negative on this alliance right now that it probably means that it is going to succeed.”
The New York Times (February 11, 2011)
The Engineer-Driven Culture of Nokia
By NICK BILTON
What a busy week for Nokia. On Wednesday, Stephen Elop, the company’s recently appointed chief executive, sent a note to Nokia employees warning that their company was in major trouble, like a man “standing on a burning platform” in the middle of an icy sea, who had to take drastic action to save himself.
Just two days later Mr. Elop joined Steven A. Ballmer, chief executive of Microsoft, to announce that the two technology giants would join forces, and that Nokia “would discard its own cellphone operating system in favor of software made byMicrosoft.”
As my colleague Kevin J. O’Brien reported from the Nokia investors’ conference in London, where the announcement was made, this “was a dramatic admission of failure by Nokia, the proud world leader in handsets that helped define the mobile age in its infancy.” It’s the company’s effort to catch up to its competitors, to take the leap off the burning platform.
But will the adoption of a new operating system be enough to reverse Nokia’s fortunes?
Some say that Nokia’s failure to get much traction in the smartphone market and its other problems are rooted in its bureaucratic corporate culture. But Adam Greenfield, a former head of design direction at Nokia, sees it a little differently. He said the company’s engineering drivenculture is also responsible, explaining that the engineers at the company see the design of the software on a mobile phone as secondary to the guts of the device. For example, he explained, executives at the company proudly promote the innards of a phone, almost like a car company gleefully showing a customer the engine under the hood.
“The engineers at Nokia brag about the number of megapixels a new phone has,” he said in a telephone interview on Thursday. “But they don’t understand that if you can’t find the button to use the camera on the phone, it doesn’t matter how many megapixels it is.”
An executive who currently works at Nokia and asked not to be named because he was not authorized to speak about the company agreed. He noted that even though thousands of Nokia employees work on design and user interface, engineering is still the company’s focus, and design is thought of as “secondary within the company.”
Incomparisonto early mobile phones, most smartphones on the market today look identical, with the same size large touchscreen (although some have keyboards and a few additional buttons). Because of the hardwaresimilarities, the major differences of these devices appear within the software — specifically, the design,functionallyand experience of the software.
Mr. Greenfield said he left the company last year after he felt that Nokia’s design was not viewed with enoughimportancein its future mobile strategy. Nokia did not respond to a request for comment asking about the internal struggle between design and engineering.
Mr. Greenfield noted that in 2002, when Nokia was the clear leader in mobile, design was not as important in creating a great cellphone. Yet with the advent of largetouch screensand the popularity and simplicity of the iPhone, the company has failed to adapt, he said. And, he said, sometimes it doesn’t even seem to appreciate Apple’s success.
“Some Nokia employees continuallydisparageApple, internally calling it The California Fruit Company,” he said.