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Will the Microsoft-Nokia Marriage Wow Consumers?

The tech giants have much work to do in the era of smartphones

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Consumers want Android, Google offers the operating system for free, so it’s a no-brainer for manufacturers — even if Motorola might seem to have an inside edge. There’s no lineup for Windows smartphones, Microsoft charges around $10 for a Windows Phone 8 license, and now it’s making its own devices in-house. Why would manufacturers even bother going there?

With the likelihood of losing third party manufacturers, anyone who wants a Windows Phone 8 smartphone will probably have to pick a Microsoft/Nokia model — for better or worse.

Now that Microsoft owns Nokia, there’s going to be tighter integration between operating system and smartphone.  Microsoft’s own hardware design efforts have had very mixed results. The Zune bombed, as the MP3 player failed to impress consumers who were hooked on Apple’s iPods. The Xbox line of video game consoles has done very well, but the Surface RT tablets have been another disaster — and, rather ominously, that failure represents the disastrous potential of Microsoft pairing its own hardware with one of its new mobile operating systems (Windows RT).

Then there’s the cooling effect Microsoft’s acquisition  could have on app developers. Smartphone market share and app availability are closely linked. That’s why both Microsoft and BlackBerry have had to offer cash incentives to developers to shore up their respective app stores. If other hardware manufacturers take a pass on Windows Phone 8, there’s a risk app developers will lose interest too. Of course, if Lumia phones turn into a smash hit and sell like hotcakes under Microsoft’s ownership, the opposite could happen.

Which will it be? Will Lumia smartphones drive Windows Phone 8 to the point where it’s more than a blip as third place, with app developers racing to get their top-sellers into Microsoft’s app store? Or will Lumias gather dust on store shelves as developers bail and upstarts like Firefox OS challenge for third place?

So far, investors seem to be feeling it’s more likely to be the latter, with MSFT off nearly 7% since the deal was announced. It seems unlikely that this PC dinosaur and a relic of the cell phone era contain the DNA needed for mainstream smartphone success. But we’re going to have to wait a year or two for the first of the Nokia phones developed under Microsoft to be released before we can get a sense of where things are going.

And we’ve all seen how much the smartphone market can change in two years.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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