As at least a couple of folks (at CNET and Seeking Alpha) have pointed out, Microsoft's Windows Phone 8 -- announced on Wednesday -- just might hurt sales of the smartphone made by its beloved mobile partner, Nokia. The problem is that current owners of Windows Phones won't be able to upgrade because WP8 apparently has some hardware requirements that preclude it functioning on older Windows phones. And by Windows phones, I'm including the Lumia 900, introduced into the U.S. market with great fanfare last January. What owner of a Lumia 900 will be happy knowing their device is running on an outmoded platform, with no chance to upgrade other than buying a new smartphone? More to the point, how many smartphone shoppers who are considering the Lumia 900 will either wait for the WP8 devices to become available or simply scratch Nokia off their lists and focus on an iPhone, Android device or even a BlackBerry (ha ha, just kidding). As Seeking Alpha noted today, "The news cannot come at a worse time for Nokia." The Finnish company is desperate to get some market-share traction in the U.S., and Microsoft's move only makes it that much harder. This comes after Monday's downgrading of Nokia by Moody's to "junk" status, which in itself is a response to Nokia's ongoing financial deterioration. Last month the company issued the latest in a string of downgraded forecasts, along with the announcement of actions -- executive shake-ups and massive layoffs -- typically associated with desperate, money-losing companies trying to avoid bankruptcy or a fire sale. Beyond its obvious problems in the market, the real issue for Nokia is that Microsoft, in the end, will do what's best for Microsoft, partnership or no partnership. This lop-sided relationship was always a dangerous one for Nokia, which is why the company briefly balked before the deal was announced in February 2011. As the Wall Street Journal reported at the time:
During this time, the talks with Microsoft nearly broke down, according to a person familiar with the matter. The main issue: Nokia executives believed Microsoft was treating Nokia as it would any potential handset partner, while Nokia was making a "bet-the-company" decision on a software partner, this person said.
Those Nokia executives were correct. This partnership means everything to Nokia. But it doesn't to Microsoft, no more so than Redmond's partnerships with other hardware manufacturers. In March 2011, I recommended that Nokia consider backing out of the partnership before it was finalized. Did they listen? No. And now look where they are. Speaking of which, shares of Nokia (NYSE: NOK) finished Wednesday trading down 4 cents, or 1.6%, to 2.50. They were at 10.88 the night before the two companies announced their partnership in February 2011, a decline of 77%. Microsoft (NASDAQ: MSFT) closed Wednesday up 23 cents, or 0.75%, to 30.93. Shares are up 12.5% since the Nokia partnership was unveiled.
Now read this: