Nokia's Problem Is Not Microsoft's Problem

| About: Nokia Corporation (NOK)
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It's official, Nokia (NYSE:NOK) executives are openly voicing criticism at Microsoft (NASDAQ:MSFT) for not doing enough in enriching the WP8 platform with enough apps to make the platform app competitive.

As Nokia's VP Bryan Biniak put it:

We are trying to evolve the cultural thinking [at Microsoft] to say 'time is of the essence.' Waiting until the end of your fiscal year when you need to close your targets, doesn't do us any good when I have phones to sell today. People rely on applications for their day-to-day life and if you don't have something which I use in my day-to-day life I'm not going to switch [operating systems] because I don't want to compromise the way I live my life just to switch to a phone. It's not just about the hardware, it's about the tools that are on the hardware. You can't sell a phone without the apps, you just can't. As a company we don't want to rely on somebody else and sit and wait for them to get it right.

Now if these statements are not an accusation of Microsoft's lack of focus on WP8, I don't know what is.

However Nokia's problem is not exactly Microsoft's problem and even if it were, there is not much that Microsoft can do about it. Here's why.

Microsoft's business is not dependent upon WP8 or Nokia selling billions of Lumia devices. Sure Microsoft would like Nokia to sell hundreds of millions of Lumia devices, because in the end it will make good money from the royalties Nokia will pay. But Microsoft does not depend its existence on this. As a result, Nokia and WP8 is not Microsoft's highest priority today (although I think it should be).

Another reason is, it's not Microsoft's business to make apps. Sure, perhaps Microsoft might be able to make several apps to compliment some of Microsoft's other business, such as its office suite, but at the end of the day it's the market that will make the apps (app developers).

It is the market that will undertake the financial risk of developing and marketing an app and bring it to market. And it is the market -- and the thousands of app developers -- that will lose the money if it is not successful. That's the nature of the business and there is no simple way around it.

What this means -- unfortunately for Nokia -- is that even if Microsoft were to spend billions on developing apps, chances are it would not be very successful at it. The reason is that you cannot replace the collective fantasy and wisdom of the market by one company and expect to become a success. Even Google (NASDAQ:GOOG) can't do that. If the same developers that make apps for Apple's (NASDAQ:AAPL) iOS and Android don't think it's worth their time and effort to port these apps to WP8, then there is nothing Microsoft or anyone can do about it.

Also, Microsoft is not married to Nokia. There are other smartphone makers that make WP8 devices. Not that Microsoft has anything against Nokia, but it has to cater to its other licensees also. It simply cannot decide to exclusively help Nokia and not help the others. Because if Microsoft ever decided to benefit Nokia exclusively, then Microsoft can kiss goodbye its chance of ever becoming a household name in the devices business. The only way for WP8 and Nokia's Lumia line of phones to get more apps, is if the developers who make these apps port them to WP8.

The good news for Nokia and Microsoft's WP8, is that in the end, I think almost every major app will eventually be ported to WP8. It will simply take time. I also think the same for BlackBerry (BBRY) as well.

And the reason for this is that there is simply too much money in apps today. According to Gartner (via the WSJ), global revenue from app stores is expected to rise 62% this year to $25 billion. That's about as much as Nokia and BlackBerry sell in devices combined. So the app business is a very big business. Eventually developers will port their top selling apps (and even the lower selling ones) to all platforms and make them available for all devices.

The bottom line is that there is not much that Microsoft can do for Nokia, except to offer consolation. However, because of the money involved in the app business, eventually all apps will be ported to WP8 (and BlackBerry's BB10 for the same reason), and Nokia will just have to wait it out.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.