There’s been an avalanche of coverage of Nokia’s tie-up with Microsoft in smart-phones.
For the reasons I touched on here, I suspect that there is less-than-meets-the-eye to Nokia+Microsoft.
Much more significant may be Apple’s push into lower-cost smartphones (which Gigaom discussed here).
So far, Apple’s strategy in smartphones, has been like its strategy in laptops – to aim at the top 10-20% of the market – not like its strategy in MP3 players (iPods), where it has 70% market share. By taking the cream of the market, Apple is able to capture the lion’s share of available profits – it probably takes around 50% of all available profits in both laptops and phones, even though its market share in both categories is only 10-15% – without suffering the complexity and expense of addressing the whole market.
Such a a strategy, though, leaves the company open to “good enough” competitors – netbooks vs. laptops, Android phones vs. iPhones.
Apple is rightly allergic to selling cheap junk, and found a wonderful way to attack the problem of netbooks vs. laptops by introducing the iPad; by reinventing tablets, Apple killed off the momentum of netbooks without having to sell a “cheap junk” netbook itself.
In the MP3 music-player (iPod) market, the company has achieved broad coverage of market segments without undermining its premium products by making lower-cost ultra-portable Mp3 players – iPod Nano etc. – where the ultra-portability inevitably restricts the range of features supported by the device.
Could it attempt something similar in phones, to counter attack against Android and increase its market coverage? Some kind of major user-interface smartphone innovation – a voice-driven user-interface? – a “scroll” interface analogous to the original iPod? – combined with ultra-portability that would let it take an iPhone variant downmarket without undermining the brand’s premium position?
My guess would be that Apple will indeed attack the mid-market, and perhaps even the lower-end in the long run. It will be interesting to see if they can achieve sufficient product innovation in those lower-priced categories to maintain strong segmentation within their iPhone range.
For a startup, the opportunity presented by Apple continues to grow.
A contrarian position might be possible – to bet on Nokia+Microsoft, because relatively few others will. That might make you stand out from the crowd, and could make you very successful if Nokia+Microsoft turns out to do well. It would also make Nokia or Microsoft into potential partners and/or acquirers. But, for me, the prospect of betting heavily on their success would be a risk too far, at least for now.
Update: The Wall Street Journal has a story on this today… They state that the “iPhone nano” is half-the-size of the iPhone-4, and:
the device was significantly lighter than the iPhone 4 and had an edge-to-edge screen that could be manipulated by touch, as well as a virtual keyboard and voice-based navigation.
which suggests innovation in both form-factor and user interface. Good for Apple! We’ll see if the changes are substantial enough to be truly differentiating.
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