

Nokia to get 'huge' payments from Microsoft   - tshtf
http://www.washingtonpost.com/wp-dyn/content/article/2011/02/13/AR2011021301548.html

======
blinkingled
I have no way to prove/disprove if or not Elop did this with straight face and
without any conflict of interests but thinking about the decisions that were
made and information that was provided - it all makes sense only if seen from
Microsoft side.

a) Nokia thought they could not differentiate enough with Android so they did
not choose it. Then they said they will not customize the WP7 experience - so
they would essentially differentiate on hardware/pricing alone. No reason they
could not do the same with Android.

b) To let go of a significant capability such as developing their own smart
phone OSes and UIs - however unsuccessful they may be in the market - and
betting your business on an as-yet under performing platform takes some amount
of stupidity.

c) Most of what Nokia sells today are not your typical smart phones. They are
losing ground to people going Android and dumping their Nokia feature phones.
But they still do not seem to have a "different" strategy for low end devices
targeting the developed world and dumb phone users in developed world. WP7 is
not it AFAICS. Both Google ($85 dual core Broadcom SoC) and Apple (with the
recent rumors of half-iPhone for sub $200 unsubsidized) have a solid plan in
place to attack that segment. It is a glaring omission from Nokia and WP7
strategy - especially so since that is an under explored market and they have
the highest chance of succeeding. Even if they hope dumb phone users will
somehow upgrade to premium WP7 handsets - they are still late to the game.

c) Nokia's competitors who have some WP7 footprint today - how they will react
tomorrow? Microsoft hasn't made any special deals with HTC/Samsung for example
and their special treatment to Nokia is so close enough to them buying and
running Nokia that those guys are going to be forced to rethink their WP7
strategies unless Microsoft offers them something to level the playing field.

d) Microsoft paying them money sounds good in the near term but it comes at a
cost of Nokia crippling themselves and risking a whole lot on Windows Phone 7
and Microsoft. The dependence on Microsoft is a huge deal - HP could've done
that but they thought it was wiser to buy Palm and bet on their own
capability.

e) Why was it so hard to execute? Elop lost a golden chance of understanding
this and fixing it. They won't have to execute on OS development now but still
there is hardware and software integration work to do that requires lot of
execution - they aren't simply going to dump hardware on Microsoft and let
them deal with it. It wouldn't scale if Samsung/HTC and others expect the
same.

~~~
encoderer
Don't "a" and "c" sort of cancel each-other out? If other makers back-off of
WP7 because of the way Microsoft got into bed with Nokia, doesn't that mean
that Nokia can differentiate just by being the company that produces beautiful
devices running Windows Phone?

And even if HTC and LG continue their existing tepid embrace of WP7, Nokia is
in a position to make the WP7 experience _theirs_. So much that if another
maker produces a WP7 phone, it may well be seen as their "Nokia Competitor."

The assertion that this makes sense only from Microsoft's POV seems totally
off to me. Points c, d, & e would really be the same if they'd gone Android
but surely the FUD peddlers wouldn't have made so much hay over that. And to
point "c" -- that there is a "glaring omission from Nokia and WP7 strategy --
dude, it was made public like 4 days ago.

~~~
blinkingled
>Nokia can differentiate just by being the company that produces beautiful
devices running Windows Phone?

You think that's their plan? You think Microsoft is naive enough to let it
happen? If the short WP7 history is any clue - it's not going to be easy for
Nokia to differentiate at all.

>And to point "c" -- that there is a "glaring omission from Nokia and WP7
strategy -- dude, it was made public like 4 days ago.

Way to miss the point - "dude". That is eons+4 days late - which boils down to
the same fact - they still do NOT have a "strategy" - which means the
Microsoft deal was made without thinking through the strategy - Is it going to
be Symbian or S40 or WP7 Starter Edition on low end devices to compete with
iPhone Mini and Dual Core $29 Androids? And that's where Nokia is hurting
right now. They could make a me too WP7 device and there is a fair chance to
fail there - but if they made a capable low end device that does most of what
iPhone 3GS and LG Optimus does - they have real chance of getting somewhere.

~~~
oikujhghjk
Everybody believes this is precisely Nokia and Microsofts stratergy.

WP7 will be the only phone that you are sure will play nicely with microsoft
email etc

Business will follow the - never got fired for buying microsoft route

Nokia is the only brand these same businessmen have heard of - they aren't
going to take a risk on some 'foreign firm'.

So Nokia becomes Microsoft's RIM.

~~~
elithrar
> So Nokia becomes Microsoft's RIM.

This would have been a good point – and certainly so if this had happened even
just a couple of years ago.

But it didn't, and business has begun to adopt the iPhone and even Android
devices because of the large gap in the market, and because Apple & Google are
driving devices that people actually want to use outside of business too.

~~~
jarek
There are so, so many businesses in North America that have not adopted iOS or
Android so far and are still using Blackberries. This deal probably gives
Nokia its best shot at getting a share of this market -- not necessarily a
great shot, but better than it would have had otherwise.

------
rst
It's still not clear how these payments are structured.

If Nokia gets paid for sales of all manufacturers' handsets (perhaps as
royalties for the Nokia mapping software), that explains why Elop says that
Nokia has a stake in the success of the platform as a whole.

But it's hard to imagine HTC or Samsung being thrilled for Nokia to get money
for sales of their handsets...

~~~
TomOfTTB
From a strategic standpoint I think HTC and Samsung will be in favor of this
deal. Nokia still has dominance in a lot of places around the world. This deal
locks Nokia into WP7 and with that being true other manufacturers can enter
Nokia dominant markets as the only Android alternatives.

Given these are companies that have bet their business on Android I suspect
they think it's superior and welcome a chance to neutralize Nokia.

So while this deal with Microsoft may give Nokia a little of the other
carriers money I'd think it will be well worth it .

------
charleso
How much in the minority am I for thinking this is a good plan for Nokia?

Echoing my post in another thread, Apple received $150 million in financing
from Microsoft back in 1997 in exchange for including IE on the Mac (among
other partnership goodies).

If you don't recall that period of computer history (when Apple almost went
bust), you may want to watch this Steve Jobs Macworld 1997 presentation
discussing their joint venture:

<http://www.youtube.com/watch?v=WxOp5mBY9IY>

"Kneeling before Zod" didn't turn out too badly for Apple.

~~~
Pooter
I don't think the comparison between 1997 Apple and 2011 Nokia is particularly
close, or instructive for understanding the deal.

But I do agree that this probably is a good deal Nokia; and for Microsoft.
Nokia was never all tha great with software, and is generally a hardware
engineering focused company. Basically, they're outsourcing all the software
dev work to Microsoft. And, apparently, getting paid (possibly very well) to
do so.

Microsoft, on the other hand, buys themselves exclusivity with a major
hardware manufacturer. Instead of getting secondary consideration after
Android from the likes of motorola or HTC, they get the whole smartphone focus
from a company with a reputation for producing reliable and high quality
hardware.

Honestly, and all jokes about two dinosaurs getting together to avoid
extinction aside, this is probably the best move for both companies, if
they're going to stand an chance of being able to compete in the upcoming
smartphone market.

~~~
Geee
I never got this argument that "Nokia is a hardware company, they don't do
good software." That's a shallow argument which doesn't really mean anything
at all.

After all, most of their R&D budget is in software development. They have
developed two dumbphone OSes (S30, S40) and two smartphone OSes (Symbian,
Maemo), which are feature-by-feature the most complete software in the market.
There's lots more of course.

But their software sucks.. Why?

~~~
Pooter
Im fine with the dumb phone OSes they've produced - they're actually nice to
use and probably the best of such systems that I've used.

My experiences with their symbian devices, though (all s60, devices) was
terrible. Crashy, with ugly and poorly implemented features, and a ui
experience well behind other devices. To be honest, I haven't tried the ^3
series, but the reviews I've read don't indicate to me that they've addressed
the problems.

Maemo, I've played with a bit, and it seems fine, but not great and not
compelling over iOS or Android. And ive only seen it on one of their tablets.

Maybe its personal preference, dunno.

------
Udo
Wait a second... so Microsoft is paying Nokia to use their software? Is
"inverse licensing" a viable strategy now?

~~~
cookiecaper
Not for a startup of course, but Microsoft sees this as an investment in
business development. MS wants Windows to be a solid mobile platform, and
they're pouring a bunch of money into the Nokia deal to increase the
availability of Windows Phone 7 handsets. It's the chicken-and-egg problem
that effects so many things; a platform can't be successful without software
to run on top of it, but no one will develop software for a platform that
isn't successful. This problem is much less hard when you have a ton of money
and can just pay people to use your platform, which is what MS is doing here.

It's not much different than pouring a bunch of money into advertising; if you
have a big partner like Nokia, it not only generates a lot of PR buzz, but it
also means that since Nokia makes a lot of phones, there will be a lot of WP7
phones out soon, which is what Microsoft wants.

~~~
cma
Ballmer absolutely ridiculed Google for making Android free. A couple of short
years later and Microsoft goes with a negative price.

~~~
hnhg
I doubt MS will extend this deal if they are successful in the market whereas
Google would find it hard charging for Android.

~~~
nextparadigms
Google doesn't have to charge for Android. They will make $10 per user from
mobile ads alone, according to a recent report.

------
thought_alarm
Headline:

    
    
        Nokia CEO: Co. to get billions from Microsoft
    

Fine print:

    
    
        Nokia will be contributing its Ovi mapping service and
        will be paying Microsoft royalties for the use of its
        software, as other manufacturers do. It will save money
        by not continuing development of its own software. The
        net benefit is still in the billions, he said.
    

In other words, Nokia is _saving_ billions by licensing WP7 and laying off
most of its workforce.

So it's exactly as everyone first assumed. Nokia is _not_ getting "huge
payments from Microsoft". Nokia is merely licensing WP7.

------
random42
From someone who has not read the press-release/documents of the partnership,
does teaming up with Microsoft, explicitly _prohibits_ Nokia to use Android(or
any other mobile platform) in the future, if need be?

~~~
jpalomaki
Nokia and Microsoft don't yet have any kind of binding agreement. Only a term
paper. This was mentioned in the press releases on friday.

As I mentioend in the comments of the other post, I believe the whole "Nokia
will get billions" is a misunderstanding from the reporters.

Elop was speaking about Nokia getting substantial monetary value, measured in
Bs not Ms. I don't think he was speaking about money changing hands.

------
sambeau
Microsoft will be hoping to recoup losses by selling apps, services and
advertising.

If xbox live proves to be a big hit on Nokia devices the strategy could work.
Nokia will also need to sell hundreds of millions of devices and the Windows
App Store will need to take off bigtime.

But it _is_ a gamble: xboxes and Bing are loss-making at present.

Maybe they have something else up their sleeve?

~~~
dangrossman
I thought the entertainment division (Xbox+) had been profitable for some
years now.

~~~
sambeau
Looks like I mis-remembered:

[http://www.betanews.com/joewilcox/article/Microsoft-Q1-2011-...](http://www.betanews.com/joewilcox/article/Microsoft-Q1-2011-by-
the-numbers-Beats-consensus-but-not-Apple/1288297586)

Q1 2011 Income by Division

• Windows & Windows Live: $3.32 billion, up 124 percent from $1.5 billion a
year earlier (20 percent growth when adding deferral).

• Server & Tools: $1.63 billion, up 32 percent from $1.24 billion a year
earlier. Business: $3.39 billion, up 20 percent from $2.83 billion a year
earlier.

• Online Services Business: Loss of $560 million, up 17 percent from $477
million loss a year earlier.

• Entertainment & Devices: $382 million, up 47 percent from $260 million a
year earlier.

although, this comment by puts it in perspective:

<http://news.ycombinator.com/item?id=1842290>

"In 2009 it finally posted it's first profit - $165 million, though it's
probably worth noting that as a percentage of the $6 billion it had lost to
that point this is basically nothing."

------
peterpaul
I wish nokia would have just continued with their meego platform as their
flagship. M$ is always posion.

~~~
burgerbrain
Headline: "Nokia to get _'huge' payments_ from Microsoft"

HN participants: "oh noes, that person just said _'M$'_! must vote that down
because clearly that is a baseless insult!"

~~~
jarek
Can't be "must vote that down because the entirety of the argument is 'M$ is
always posion' and that falls just barely short of my standard for HN
discussion."

------
mcantelon
Apparently the Nokia CEO holds over $3M in Microsoft stock. In addition to
this obvious conflict of interest, EU is going to be interested in this
attempt to make a Finnish corp dependent on a US corp.

[http://finance.yahoo.com/news/Nokia-CEO-Elop-Denies-Being-
si...](http://finance.yahoo.com/news/Nokia-CEO-Elop-Denies-Being-
siliconalley-273261050.html?x=0&.v=1)

~~~
joe_the_user
Yes,

Considering that the EU also recently paid Nokia to keep developing Symbian,
my naive thought is the EU would be very interested in this.

[http://www.unwiredview.com/2010/11/02/explaining-symbeose-
sy...](http://www.unwiredview.com/2010/11/02/explaining-symbeose-symbian-eu-
funding-thing-relax-symbian-ain%E2%80%99t-dead-even-foundation-may-survive-
now/)

But I would easily admit my naive ideas about could be wrong given the many
things that happen under the radar these days...

Edit: Elop denies being "the seventh largest Microsoft shareholder" despite
being listed as such but confirms the level of share-holding which the list
has. He's certainly not the seventh largest share holder of any kind, he
certainly holds far less than Bill gates but it seems clear he is the seventh
largest individual shareholder with ~$3 in shares.

~~~
jarek
He is, at most, the ninth largest _known_ individual shareholder. He can't get
rid of said shares for regulatory reasons. Please see the discussion at
<http://news.ycombinator.com/item?id=2212555>.

~~~
mcantelon
Whether or not he can get rid of his shares in the short term, what is good
for Microsoft is good for his net worth which, it would seem, creates a
conflict of interest.

