Microsoft Buys Nokia: The Rule of Three

Hola Todos!

I apologize for being quiet for a while.  August was a great month to be outside and have fun the family.  In addition, I have my tenure packet due this October so between that and classes, DigNuggetville has not been as active.

That said, one of the biggest stories of the week has been Microsoft buying Nokia.  In short, Microsoft HAD to make this deal happen.  The future is mobile and Microsoft is still not a major player in this marketplace.  Moreover, Microsoft has a $7 Billion marketing deal with Nokia – the only smartphone manufacturer to use the Windows Mobile OS.  Microsoft has not been able to convince any other smartphone company to use their OS and if something were to happen to Nokia, Microsoft would be locked out.  In summary, this deal had to get done.

Beyond the fact that neither Microsoft nor Nokia is market orientated, my biggest thought on these events is The Rule of Three.  Without question, the smartphone marketplace is maturing (which is a major reason why we will see the more affordable iPhone 5c next week) and when marketplaces mature, the number of major players reduces.  Usually in highly competitive, lower growth zero-sum marketplaces, the only way to gain market share is to steal it from your competitors.  If this is the case, only a few firms will survive that cutthroat environment.  Therefore, there will be room for a #1, a strong #2 and finally weak #3 with perhaps a few small niche players.

Just as recent has 3 years ago, there were 6 major OS players in the market: iOS, Android, Symbian, Palm, Windows, and Blackberry. As I said many times in class, there is no way all those firms will survive.  This Microsoft deal places an enormous amount of pressure on Blackberry.  Microsoft has deep pockets, Blackberry does not…meaning something is going to happen to Blackberry relatively soon. Either they are going to go under due to the market strength of Apple, Android and the deep pockets of now Nokia or someone such as Samsung or Amazon who does not want their mobile future anchored to Android is going to buy Blackberry.

Something to think about today…

 

Best regards

Dr. Dan-o

 

Daniel M. Ladik, Ph.D.,

Associate Professor of Marketing

Stillman School of Business

Seton Hall University

 

 

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