Microsoft’s Place In The Smartphone Manufacturing Ecosystem

Juniper Research expected Nokia’s smartphone shipment to be 6% of the market in 2013. With the sale not expected to be final until the first quarter of 2014, that number is not going to change substantially.

Nokia introduces its first Windows Phones at Nokia World 2011 For Microsoft, its Windows Phone 8 mobile operating system has not made huge gains Apple and Android. In the second quarter of 2013, Microsoft had 3.3% of the smartphone operating system marketshare with 7.4 million devices shipped. Android held the global lead with 79% of devices shipped with Apple steady at 14.2%, according to research firm Gartner. The 7.4 million Windows Phones shipped last quarter can be attributed almost 100% to Nokia, if Gartner’s numbers are correct (Nokia-reported sales numbers for the second quarter were squarely at 7.4 million). Microsoft licenses Windows Phone to other manufacturers (Samsung and HTC being the major ones) but none have become popular with consumers. For Windows Phone, Nokia is the one and only partner that matters. Now that Microsoft owns Nokia, there is little reason for other manufacturers to license Windows Phone. Microsoft may try to keep other manufacturers in the fold (the way Google has with companies like Samsung, HTC, Huawei, LG, ZTE even after the Motorola acquisition) but it is more likely that Microsoft will move towards a more centralized process in the same mode that Apple does with the iPhone.

“The steadily diminishing investments by other Windows Phone licensees has left Microsoft with essentially a single bearer of the standard—Nokia—and they now appear poised to adopt a vertically integrated strategy more akin to Apple's,” said Forrester research analyst Charles Golvin. The question for Microsoft will be whether having Nokia around to build smartphones will extend to alienating its other manufacturing partners that build laptops and tablets based on Windows 8. Nokia has been rumored to build a Windows RT tablet to be released this fall. At Microsoft’s Build developer conference in June, the company showed off a litany of tablets, laptops and dual-mode devices that can essentially be bother laptop and tablet. These came from a variety of manufacturers such as Lenovo, Acer, Dell and others. Nokia will be leading the design of its tablets with its own hardware division going forward, activating Nokia’s well of talent for the purpose.

“[The alienation of smartphone manufacturers] may even extend to tablets, as Nokia will probably now assume the leadership position within Microsoft of designing and building tablets (especially in light of the rumored Nokia RT tablet),” Gold said. “Microsoft may gain a competitive posture against Apple (which in my opinion is vulnerable to attack on this front), but it may not easily achieve what it is looking to do.”