Shifting OS Sands

Hewlett-Packard Co. (HP) unveiled its first major webOS products since it acquired Palm last year. Meanwhile, Nokia Corp. announced that Microsoft Corp.'s Windows Phone will become Nokia's primary smartphone platform.

Focal Points:

• HP announced three new products based on webOS, and said that it would bring the formerly-Palm operating system "to the HP devices with the broadest reach," meaning PCs. The 9.7-inch tablet, called the TouchPad, is a Wi-Fi only device; although HP promised a cellular version will follow. It has a display resolution of 1024x768, is 13mm thick, and offers a front-facing camera for video chat, said HP. The TouchPad also includes a 1.2GHz dual-core Snapdragon processor, a choice of 16GB or 32GB of memory, and support for Flash, HP added. HP also unveiled the third generation of the Pre handset and the compact Veer. The Pre 3, due out this summer, doubles the display resolution of the Pre 2, as well as adds HD video recording and a front-facing camera. It comes in HSPA+ or CDMA EV-DO versions, and offers a 1.4GHz Snapdragon and a choice of 8GB or 16GB of memory, according to HP. The Veer has the same slider keyboard as the Pre, but is much more compact. It runs HSPA+ with 802.11b/g and Bluetooth 2.1, and includes an 800MHz Snapdragon and 8GB of storage, HP added. Both smartphones can function as personal hotspots, enabling sharing of information between webOS-based tablets and handsets. HP said that webOS also now offers voice dialing and improved multitasking, to be included in all three new products, and to be available as a software update for Pre 2. HP did not provide any details about its webOS PC plans, but did say that they would appear "later this year."
• Nokia announced that Windows Phone will become Nokia's primary smartphone platform, after spending years trying to avoid Microsoft. Previously, Nokia joined and then bought Symbian, hooked up with Intel Corp. on MeeGo for mobile Linux, and bought the Qt cross-platform framework. As a result of this announcement, Symbian and MeeGo are sidelined and Qt is expected to become irrelevant. Nokia plans to ship a MeeGo-related product later this year, but has demoted the OS from a "platform" to a "project." The companies will not be forming a joint venture or spin-out, and did not mention any exclusivity on any of the many areas touched on by the announcement. Nokia said that it will gain Microsoft's software development tools and promised to use Bing, while Microsoft said that it will use Nokia's Maps for location services. According to Nokia CEO Stephen Elop, the handset manufacturer expects to reduce R&D expenditures significantly. Additionally, Nokia announced some company reorganization, as well as the departure of the executive in charge of MeeGo.
• According to Nokia and Microsoft, Nokia will at least have input into the Windows Phone roadmap. Not only will Nokia "help drive and define the future of Windows Phone," but "Nokia and Microsoft will closely collaborate on development, joint marketing initiatives and a shared development roadmap," according to the companies' announcement. For competing handset manufactures, this means that their biggest competitor will now help Microsoft build and sell the same phone OS from which they are trying to make money. Additionally, Nokia will try to ensure its handsets work best with Windows Phone.  As to why Nokia selected Windows Phone over Google, Inc.'s Android, Elop said that "Nokia would have had problems differentiating." Moreover, the commoditization risk was high. Elop believes prices and profits are coming down, and the value is moving out to Google. Nokia's CEO added that with Microsoft, Nokia could make low to midrange smartphones (valued under $100) better than it might with Google. In related news, Nokia declined to provide an earnings forecast for the year for its phones business, describing 2011 and 2012 as years of "transition."

Experton Group believes Microsoft made significant gains into the smartphones market while taking a small hit on the PC and tablet side from the HP move. The Windows Phone 7 platform had been relegated to fourth place prior to the Nokia tie-up; but by joining forces with the largest player, the platform will be able to become one of the top three and therefore survive a shakeout. However, the move does not bode well for Nokia over the short- to intermediate-term and long-term the outlook is fuzzy, especially in terms of market position and margins. Nokia had resisted moving to Microsoft over the years because of the slim margins Microsoft leaves to the OEM providers. Nokia will drastically slash its R&D costs but it is unclear whether that will give it enough breathing room. It was inevitable that an ex-Microsoft executive would select Microsoft over Google but the company could have remained on Symbian, which was one of the major operating systems. Nokia will go through a tough transition period and can be expected to see a lot of voluntary as well as involuntary attrition. Meanwhile, the HP move adds to the pressure Microsoft is getting as users seek to hop amongst a number of client platforms. The vendor will have to quickly address the changing market or see its dominant position slip away as the traditional PC is replaced by alternative choices.

IT executives should re-examine their strategies on client devices – if it has not been done lately – and update their policies on the acquisition, use and disposition of these devices as well as on encapsulation and protection of data.