Microsoft's partnerships with Yahoo, Nokia and possibly RIM hint at its broader strategy for conquering the cloud and mobile spaces.
It's no secret
that Microsoft faces a host of challenges as it attempts to shift its focus
from the traditional and desktop-bound to a more cloud-centric, mobile-focused
model. For companies with tens of thousands of employees and decades' worth of
institutional memory, recoding the corporate DNA to meet new challenges is an
undertaking with a lot of risk, and a high potential for failure.
Given its size
and cash flow, as well as the solidity of its traditional product lines, such
as Windows and Office, Microsoft could have walked that path to the cloud and
mobile alone. Instead, the company seems determined to join in massive,
broad-based partnerships with other tech giants-saving it some cash and effort,
but also placing some part of its fate in the hands of those companies' ability
It started, in
many ways, with Yahoo. After trying-and failing-to buy the Web portal company
for $44.6 billion, Microsoft took a different approach in the summer of 2009,
inking a 10-year deal in which Microsoft's Bing search engine would power
Yahoo's back-end search. The two companies expect all Yahoo customers and
partners to move to Bing by 2012, provided the integration itself continues to
analytics firm comScore, Bing owns 13.6 percent of the search-engine market,
versus Google, with 65.4 percent. When you combine Bing's share with Yahoo's
16.1 percent stake, then Microsoft's total market share rises to 29.7 percent.
While those numbers don't exactly pose an existential threat to Google, they
solidly refute some pundits' early expectations that Bing would die a quick and
messy death soon after its rollout in summer 2009.
The Yahoo deal
also allowed Microsoft to gain many of the benefits of an outright merger at a
fraction of the cost.
encouraged by that development, Microsoft moved to enact a partnership with
another massive player in the tech space: Nokia. Under the reported terms of
the agreement between the two companies, Microsoft will pay the Finnish
manufacturer some $1 billion over five years to manufacture handsets running
Windows Phone 7. In return, Nokia will apparently pay Microsoft a licensing fee
for every copy of Windows Phone 7 installed on a smartphone.
News of the
deal came just as a comScore report suggested that Microsoft's share of the
U.S. smartphone platform market dipped 1.7 percentage points between October
2010 and January, from 9.7 percent to 8 percent. That lagged behind Google,
which ended January with 31.2 percent of the market, Research In Motion with
30.4 percent and Apple with 24.7 percent.
hoping that its new Windows Phone 7 platform, which aggregates Web content and
applications into six subject-specific Hubs, will eventually gain traction with
consumers and businesses as a viable alternative to Google Android, BlackBerry
and the iPhone.
But in the
United States, one of Windows Phone 7's chief areas of market focus, the Nokia
deal, is unlikely to have a substantial effect. According to comScore, Nokia
fails to place in the U.S. top-five rankings for either OEMs or smartphone
platforms. In the OEM scenario, it ranks behind Samsung, LG, Motorola and
others; in platforms, it's behind even Palm at 3.2 percent.
scenario is markedly different. According to data from analysis firm
StatCounter, Symbian holds some 30.7 percent of the global market, ahead of
Apple iOS at 24.6 percent, Android at 15.2 percent and RIM at 14.5 percent.
Should Nokia and Microsoft manage to transition the former's software platform
to Windows Phone 7 with relatively little bleed-off, those sorts of percentages
could translate into a very significant gain for Microsoft as it seeks to
re-establish its smartphone bona fides.
competing with RIM in the smartphone arena, Microsoft is reportedly prepping a
partnership with the Canadian firm over cloud services. According to a March 17
Bloomberg report, Microsoft will assist RIM in porting customers' data to the
"It's a more
efficient model for everyone," Jim Tobin, a RIM executive, told Bloomberg in an interview
adopted an "all-in" strategy with regard to cloud services. However, the
roadmap for those initiatives' adoption and revenue remains unclear.
haven't given any guidance on the revenue of that and how fast it's going to
ramp up," Peter Klein, Microsoft's chief financial officer, told analysts and
media during a Jan. 27 earnings call. "It's one of those things where it's
going to happen, and the exact sort of speed of the ramp is uncertain. I do
believe that once it starts to accelerate, it's going to accelerate pretty
cloud efforts have largely focused on initiatives such as Office 365, whose
subscription-based model-allowing organizations to stay up-to-date with the
latest versions of Microsoft Office, SharePoint Online, Exchange Online and
Lync Online-is one shared by other services such as Azure.
in the cloud space, obviously, could help Microsoft greatly as it seeks to take
on Google, Oracle, Salesforce.com and other companies determined to carve out
their own territory. But as with Nokia and Yahoo, it remains to be seen whether
such partnerships-despite the cost savings versus an all-out
acquisition-translate into longer-term victory.