Most technology companies don’t often get the chance to regain a market category lead after being swept aside by not one but two technology giants. In most cases after losing the lead, the company either pivots to a new category or goes out of business. Some companies hit the reset button and make that difficult decision to start over and battle back to regain the relevancy they once had. The latter description, as you probably suspect, aptly portrays Microsoft (NASDAQ:MSFT) and Nokia (NYSE:NOK) , whose comeback story has all but been written down as a loss.
But Wall Street and several technology pundits are saying not so fast. Microsoft’s stock is up 47% over the past 12 months and both European and U.S. regulators have cleared the way for its purchase of Nokia. In fact if you look at the numbers, the Windows Phone is the fastest growing smartphone platform, it’s the 2nd most used OS in Latin America and India, it grew 48% year over year (YoY) in EMEA and enjoyed a 366% increase YoY for Nokia Lumia sales in the United States.
I spoke with Todd Brix, Microsoft’s General Manager, Windows Apps and Store and he had a rather confident way of explaining how the new Windows 8 platform (phones, tablets and Windows OS) will revolutionize the industry by providing developers with easy to use tools and better ways to monetize their apps – cross platform: “Right now, I wouldn’t trade places with anyone in terms of our prospects.”
Brix feels like they have the winds at their backs and have now built critical mass in a market dominated by Android and Apple AAPL -0.26%’s iOS. “We’ve just added Vine, Instagram and Waze and look for several more popular apps in the near future,” Brix said.
But even with some wind, it’s still going to be a tough battle.
Welcome to the mobile revolution. And Microsoft believes it’s going to be a major player again because of its big breakthrough in providing seamless integration with Windows 8.1, Office 365 and Xbox for developers and customers. Neither Apple (NASDAQ:AAPL) nor Android can claim those kinds of capabilities nor do they have the ability to do it anytime soon.
Nokia is doing its part by providing high quality mobile devices and software solutions like its social networks for apps – called App Social which is essentially a social network for people to share and discuss their favorites apps (see disclosures). As Vincenzo Belpiedi, Nokia’s Head of App Discovery described it to me, App Social: “Democratizes the App Store by letting users, bloggers, influencers, journalists & even developers create list of their favorite apps which anyone in the community can follow and get great recommendations from.”
The idea is to take App discovery out of the invisible hands of the anonymous people deciding which apps to highlight and give it to the crowd. Belpiedi told me they have several users with tens of thousands of followers which make them very influential to new app developers. “Being featured by an App Social influencer can have a significant impact on their bottom line,” he explained to me.
But of course it’s not just the mobile story that Microsoft is counting on to regain the lead. Interestingly, it’s the integration story with its other successful lines of business which will help lift its mobile line to surpass Apple’s within four years.
As we’ve seen, Microsoft has been incredibly aggressive in expanding their global data centers in order to provide cloud services to customers. Office 365 is considered a massive success, and their enterprise business has been expanding at more than 8% every year since 2008. Microsoft’s Azure is seeing exponential growth and their SharePoint/Yammer and Dynamics business are growing in the double digits.
So why does all of this help Microsoft to dominate Apple mobile devices in three years? First of all, both Microsoft’s and Nokia’s dominance in emerging countries and the high demand for low cost smart phones will help propel Microsoft into the number two position globally (Only the Android OS can compete here).
Second, as Microsoft roles out its integration capabilities to business people across the enterprise through Office 365 and Windows 8.1, and to consumers through the Xbox, Microsoft will pick up a lot of new users that are looking for seamless app integration across their business and home lives. Most people will not want their information stuck in separate operating systems for much longer.
In sum …
As I’ve shown, and despite inaccurate perceptions, most of Microsoft’s business lines are doing well. They are a growing and dominant enterprise technology company that is retooling under their One Microsoft initiative. That vision of a One Microsoft and their acquisition of Nokia (along with their innovative app solutions like App Social) will help them regain a leadership position in the mobile market because a low cost, integrated smart phone will be too good an option to pass up for users in emerging countries. Moreover, home and business users will increasingly realize the benefits of a seamless user experience across screens and gravitate to a Windows 8 platform that maintains their play and their work no matter where they are.
Disclosure: Nokia is a customer of Evolve! a company that Fidelman (@markfidelman) is a Managing Director