About Jean-Louis Gassée

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Posts by Jean-Louis Gassée:

Microsoft and Nokia won’t beget a Googorola clone

 

by Jean-Louis Gassée

Microsoft, after its highly visible 2011 bet on Nokia, could have decided to go one step further and buy Nokia to become a fully integrated smartphone. That it didn’t happen doesn’t portend a great future for Windows Phone.

Last week, the Wall Street Journal outed Microsoft’s unsuccessful attempt to acquire Nokia:

Microsoft recently held advanced talks with Nokia about buying its handset business, people familiar with the matter said, as laggards in the fast-moving mobile market struggle to gain ground.

Many saw an acquisition as an inevitable next step, that by acquiring the Finnish handset maker Microsoft could “finish the job” that they started when they licensed a special Windows Phone to Nokia. It would be a blessed union of two vigilant, watchful companies: Microsoft had watched as Android and iOS made its own OS a distant also ran; Nokia, once the world’s largest cell phone maker, couldn’t help but notice that Google and Apple had killed its handset business from both the high and low ends.

But, according to the WSJ, the parlay came to a negative and apparently definitive end:

The discussions faltered over price and worries about Nokia’s slumping market position, among other issues, these people said. One of the people said talks took place as recently as this month but aren’t likely to be revived.

To call Nokia’s fall a “slump” is more than polite. The company saw its market share fall from 39% in 2009 — more than 100 million handsets per quarter — to an estimated (and angrily debated) 3% by the end of 2012.

Microsoft hasn’t done much better with its mobile software. In 2008, Windows Mobile OS held a 11% market share, even as the underlying Windows CE engine was getting long in the tooth, particularly when compared to the Unix-ish Android and iOS engines. With a modern NT kernel, Microsoft’s mobile OS was reborn as Windows Phone 8 and scored a modest 3.2% market share in Q1 2013.  This number comes from IDC, the “research” group that has assured us that come 2016, Microsoft will be the number 2 mobile OS provider with a 19.2% share:

09-table nokia

Behold the vision and precision of IDC’s psychics: Back in June 2012, they could see four years into the future and predict that Windows Phone would edge out iOS… by two tenths of a percent!

We’ve heard the Microsoft-is-buying-a-handset-maker rumors before. Starting in 2007 and recurring year after year, Microsoft was said to be eyeing RIM/Blackberry. For some, yours truly included in January 2012, the RIM story was compellingly straightforward: RIM’s clientèle of loyal, hardcore Blackberry users in businesses and governments made it an ideal fit for the Redmond giant.

Microsoft’s defenders will argue that RIM ’07 was too expensive. Priced at $200 a share (they’re running at about $14 today), RIM would have cost more than a $100B before any acquisition premium. At the time, Microsoft was valued at approximately $250B (similar to today’s $277B). Ideal or not, the match didn’t make sense for Microsoft shareholders. Then, when RIM’s price began to slide, the Blackberry was seen as having lost too much of its shine, too much of its market momentum. The company was damaged goods. (Or, as we might have forgotten, the two co-CEOs, Mike Lazaridis and Jim Balsillie, the ones who spoke in tongues, may have proved too difficult for even Steve Ballmer to deal with.)

Someday, Microsoft’s inability to grab RIM might be seen as a signal failure, a key episode in the company’s slide into irrelevance in the smartphone market. I doubt anyone will see Nokia in a similar light, as the “one who got away”.

The “MicroNokia” relationship has been challenging from the start. In February 2011, Nokia committed itself to a special partnership with Microsoft. It would ditch its operating systems (Symbian, Meego, QT) and become a beacon and standard bearer for Windows Phone 7. Money changed hands: $250M of “platform support” per quarter was sent from Redmond to Espoo in order to offset the unspecified Windows Phone licensing payments that flowed in the opposite direction.

This messy, technologically and culturally unsound arrangement only got worse when Stephen Elop, the former Microsoft exec now running Nokia, announced the switch to Windows Phone ten months before the company would end up shipping devices that ran the new (and problematic) OS. Unsurprisingly, Nokia’s revenue evaporated, leaving it with losses and a minuscule 5% market share (including Symbian-based smartphones).

Why Elop would make an announcement that effectively Osborned the business still mystifies and enrages Nokia supporters such as Tomi Ahonen who keeps calling for Elop’s head in long, irate blog posts. (In industry lore, to “Osborne” is to prematurely announce a product that so clearly obsoletes your current offering that it kills revenue. The suicidal maneuver is named in loving memory of portable computer pioneer Adam Osborne who destroyed his business by bragging that his next product would be so much better than the current one.)

I’m also mystified, but for another reason. I can’t fathom why Nokia picked Windows Phone instead of Android, whose explosive success was obvious even as early as 2010 when the company ditched its CEO. (I’m a little biased here as, in June 2010, I wrote a tongue-in-cheek piece titled Science Fiction: Nokia goes Android.)

Nokia’s excuses for not adopting Android were vague, ranging from “we don’t want to lose control of our destiny”, to Microsoft being a “stronger partner” (read: They paid us). The potential-loss-of-destiny rhetoric falls flat, especially when you look at Android’s licensing terms and see the freedom Samsung and others enjoy with their interpretations of the platform. (We’ve heard that Nokia and Google once talked, but we don’t yet know the reason for their not becoming highly visible partners.)

Today, investors say Nokia is worth about $15B, a tenth of its 2007 peak (I’m excluding the 2000 Internet Bubble number from the comparison). Even with a “25% acquisition premium”, a Nokia acquisition would cost Microsoft less than 10% of its capitalization. So, contrary to the charitable explanation offered to the WSJ by “persons familiar with the matter”, price couldn’t have been an obstacle. That leaves us with Nokia’s “slump”: Microsoft thinks Nokia would be unable to carry Windows Phone to an influential, sustainable market position.

Now, what?

Nokia’s revenue keeps sliding down and, after a brief incursion into the black, it keeps losing money. Is there anything in sight that will reverse the trend? It’s doubtful that the company can try for the high end by offering better hardware than Samsung, nor can they squeeze into a low end that’s inhabited by official and unofficial Android clones that are swiftly killing off feature phones. This leaves Nokia’s future as an independent company in doubt and logically gives rise to more acquisition speculation.

And what will happen to Windows Phone? We now hear that Microsoft is paying developers as much as $100,000 to write or port an application to the platform. This is a rational move on Microsoft’s part, an attempt to create the critical mass that doesn’t seem to be able to happen naturally. But it can also be seen as desperation, an admission that Windows Phone is having trouble gaining momentum as developers and customers are embraced in a downward spiral.

One can’t imagine that Ballmer will call it a day and cede the field to Google and Apple. Personally, I admire his never-give-up attitude, always talking up the future, unfazed by past bold pronouncements gone wrong, but enthusiasm isn’t a strategy. And in the smartphone market, Microsoft doesn’t have many moves left. Regardless of the technical merits of its new mobile OS, momentum seems elusive; market forces that once worked against Windows competitors in the PC field now seem to confine Windows Phone to an insignificant market share against the two dominant and their complementary business models.

We don’t know yet how Google’s acquisition of Motorola will fare, but the Android platform is healthy enough without it. The same can’t be said of Windows Phone without Nokia, which leads one to believe there will be a forced marriage between the once proud Finnish handset maker and an ambitious player, probably Chinese — with Microsoft providing a substantial dowry once again.

In the meantime, we can count on IDC to provide fresh numbers… for 2017.

JLG@mondaynote.com

Goodbye Google Reader

 

Three months ago, Google announced the “retirement” of Google Reader as part of the company’s second spring cleaning. On July 1st — two weeks from today — the RSS application will be given a gold watch and a farewell lunch, then it will pack up its bits and leave the building for the last time.

The other items on Google’s spring cleaning list, most of which are tools for developers, are being replaced by superior (or simpler, friendlier) services: Are you using CalDAV in your app? Use the Google Calendar API, instead; Google Map Maker will stand in for Google Building Maker; Google Cloud Connect is gone, long live Google Drive.

For Google Reader’s loyal following, however, the company had no explanation beyond a bland “usage has declined”, and it offered no replacement nor even a recommendation other than a harsh “get your data and move on”:

Users and developers interested in RSS alternatives can export their data, including their subscriptions, with Google Takeout over the course of the next four months.

The move didn’t sit well with users whose vocal cords were as strong as their bond to their favorite blog reader. James Fallows, the polymathic writer for The Atlantic, expressed a growing distrust of the company’s “experiments” in A Problem Google Has Created for Itself:

I have already downloaded the Android version of Google’s new app for collecting notes, photos, and info, called Google Keep… Here’s the problem: Google now has a clear enough track record of trying out, and then canceling, “interesting” new software that I have no idea how long Keep will be around… Until I know a reason that it’s in Google’s long-term interest to keep Keep going, I’m not going to invest time in it or lodge info there.

The Washington Post’s Ezra Klein echoed the sentiment (full article here):

But I’m not sure I want to be a Google early adopter anymore. I love Google Reader. And I used to use Picnik all the time. I’m tired of losing my services.

What exactly did Google Reader provide that got its users, myself included, so excited, and why do we take its extermination so personally?

Reading is, for some of us, an addiction. Sometimes the habit turns profitable: The hours I spent poring over computer manuals on Saturday mornings in my youth may have seemed cupidic at the time, but the “research” paid off.

Back before the Web flung open the 10,000 Libraries of Alexandria that I dreamed of in the last chapter of The Third Apple my reading habit included a daily injection of newsprint.  But as online access to real world dailies became progressively more ubiquitous and easier to manage, I let my doorstep subscriptions lapse (although I’ll always miss the wee hour thud of the NYT landing on our porch…an innocent pleasure unavailable in my country of birth).

Nothing greased the move to all-digital news as much as the RSS protocol (Real Simple Syndication, to which my friend Dave Winer made crucial contributions). RSS lets you syndicate your website by adding a few lines of HTML code. To subscribe, a user simply pushes a button. When you update your blog, it’s automatically posted to the user’s chosen “feed aggregator”.

RSS aggregation applications and add-ons quickly became a very active field as this link attests. Unfortunately, the user interfaces for these implementations – how you add, delete, and navigate subscriptions — often left much to be desired.

Enter Google Reader, introduced in 2005. Google’s RSS aggregator mowed down everything in its path as it combined the company’s Cloud resources with a clean, sober user interface that was supported by all popular browsers…and the price was right: free.

I was hooked. I just checked, I have 60 Google Reader subscriptions. But the number is less important than the way the feeds are presented: I can quickly search for subscriptions, group them in folders, search through past feeds, email posts to friends, fly over article summaries, and all of this is made even easier through simple keyboard shortcuts (O for Open, V for a full View on the original Web page, Shift-A to declare an entire folder as Read).

Where I once read four newspapers with my morning coffee I now open my laptop or tablet and skim my customized, ever-evolving Google Reader list. I still wonder at the breadth and depth of available feeds, from dissolute gadgetry to politics, technology, science, languages, cars, sports…

I join the many who mourn Google Reader’s impending demise. Fortunately, there are alternatives that now deserve more attention.

I’ll start with my Palo Alto neighbor, Flipboard. More than just a Google Reader replacement, Flipboard lets you compose and share personalized magazines. It’s very well done although, for my own daily use, its very pretty UI gets in the way of quickly surveying the field of news I’m interested in. Still, if you haven’t loaded it onto your iOS or Android device, you should give it a try.

Next we have Reeder, a still-evolving app that’s available on the Mac, iPhone, and iPad. It takes your Google Reader subscriptions and presents them in a “clean and well-lighted” way:

For me, Feedly looks like the best way to support one’s reading habit (at least for today). Feedly is offered as an app on iOS and Android, and as extensions for Chrome, Firefox, and Safari on your laptop or desktop (PC or Mac). Feedly is highly customizable: Personally, I like the ability to emulate Reader’s minimalist presentation, others will enjoy a richer, more graphical preview of articles. For new or “transferring” users, it offers an excellent Feedback and Knowledge Base page:

Feedly makes an important and reassuring point: There might be a paid-for version in the future, a way to measure the app’s real value, and to create a more lasting bond between users and the company.

There are many other alternatives, a Google search for “Google Reader replacement” (the entire phrase) yields nearly a million hits (interestingly, Bing comes up with only 35k).

This brings us back to the unanswered question: Why did Google decide to kill a product that is well-liked and well-used by well-informed (and I’ll almost dare to add: well-heeled) users?

I recently went to a Bring Your Parents to Work day at Google. (Besides comrades of old OS Wars, we now have a child working there.) The conclusion of the event was the weekly TGIF-style bash (which is held on Thursdays in Mountain View, apparently to allow Googlers in other time zones to participate). Both founders routinely come on stage to make announcements and answer questions.

Unsurprisingly, someone asked Larry Page a question about Google Reader and got the scripted “too few users, only about a million” non-answer, to which Sergey Brin couldn’t help quip that a million is about the number of remote viewers of the Google I/O developer conference Page had just bragged about. Perhaps the decision to axe Reader wasn’t entirely unanimous. And never mind the fact Feedly seems to already have 3 million subscribers

The best explanation I’ve read (on my Reader feeds) is that Google wants to draw the curtain, perform some surgery, and reintroduce its RSS reader as part of Google+, perhaps with some Google Now thrown in:

While I can’t say I’m a fan of squirrelly attempts to draw me into Google+, I must admit that RSS feeds could be a good fit… Stories could appear as bigger, better versions of the single-line entry in Reader, more like the big-photo entries that Facebook’s new News Feed uses. Even better, Google+ entries have built in re-sharing tools as well as commenting threads, encouraging interaction.

We know Google takes the long view, often with great results. We’ll see if killing Reader was a misstep or another smart way to draw Facebook users into Google’s orbit.

It may come down to a matter of timing. For now, Google Reader is headed for the morgue. Can we really expect that Google’s competitors — Yahoo!, Facebook, Apple, Microsoft — will resist the temptation to chase the ambulance?

–JLG@mondaynote.com