Microsoft reboots Windows Phone, Nokia grins and bears it

Microsoft has been on a roll this week. First it took everyone by surprise with its Surface tablet and today it appeased everyone by delivering most of the features that were on everyone’s Windows Phone update checklist. Microsoft has not just refreshed Windows Phone platform but has rebooted it completely with Windows Phone 8. Gone is the Windows CE kernel and in comes Windows NT core that the smartphone platform will share with tablets and PCs running on Windows 8, making it easier for developers to create apps for both environments. This would also enable OEMs to use more powerful hardware enabling them to create better user experiences and developers to offer high quality apps and games.
But all this comes at a price – smartphones running on Windows Phone 7.5 won’t get upgraded to Windows Phone 8 as most of the new capabilities are hardware driven. And this will sting Nokia for the next couple of quarters till the first Windows Phone devices make an appearance towards the end of the year. Read on for my thoughts about how this bodes for both Microsoft and Nokia.
Windows Phone 8 is a significant move for Microsoft that will finally bring to reality the concept of having a single cohesive platform that covers all possible form-factors – PCs, laptops, tablets and smartphones. This is the promise Microsoft has been peddling since the days of the XDAs and Windows Mobile running PDAs (remember those?). With higher resolution displays, multi-core processors, better apps with multitasking support and a lot of Nokia’s software solutions, Windows Phone 8 devices finally appear competitive with other Android smartphones and hopefully even the iPhone.
In short, this is what Windows Phone should have been when it was first announced way back in 2010. I was present at the Microsoft press conference in Barcelona when Joe Belfiore first showed the Metro UI. It was something no one had ever seen on a smartphone, but it lacked substance. The next version, Windows Phone 7.5, was a slight improvement but it was done to buy Microsoft more time till it built the real thing.
Windows Phone 8 is THAT thing. The strategic tie-up with Nokia was crucial for Microsoft to ensure the platform did not suffocate for the lack of a serious OEM partner. Those who believe that Nokia committed a serious mistake by going for Windows Phone instead of Android do not see the bigger picture. Nokia always knew it would be Windows Phone 8 and not the intermediary Windows Phone 7.5 that would rescue it from the “burning platform”. Nokia CEO, Stephen Elop, has maintained from the beginning (February 2011) that the first two years will be the transition period. And the next couple of quarters will be the most difficult ones that could also mark the end of the transition period and put Nokia back on track for recovery.
However, the timing of Windows Phone 8 could not have come at a worse time for Nokia. It has just announced massive layoffs and a dismal outlook for its second quarter results. On top of that comes the news that the smartphones Nokia has just launched and is planning to launch in many markets would be outdated within the next six months. What’s worse, its Symbian smartphones aren’t selling well either and the first smartphones running Windows Phone 8 will only be available close to the holiday season, which is six months away. In essence, Nokia has relatively little to sell for the next two quarters.
Nokia has no choice but to grin and bear it. Elop has promised low-end Windows Phone smartphones, which obviously won’t run on Windows Phone 8. Nokia could probably look at launching sub-Rs 10,000 (approximately $200) unsubsidized smartphones running on Windows Phone Tango to take on cheap Android smartphones just to keep the numbers going. These cheaper smartphones will be critical for Nokia while it bides its time for the first Windows Phone 8 smartphones.
Yes, time is running out for Nokia but I still believe it is just one hit away from regaining the lost ground. Will Windows Phone 8 provide that hit? Nokia certainly thinks so and I hope it does.