The mobile market, the where's, what's and why's

Much is being made of today’s news of a Microsoft-Nokia partnership. The world’s largest software company hooking up with the world’s largest mobile phone company is certainly newsworthy. But will this marriage last? More importantly, will it be a happy union? If history is anything to go by, Microsoft’s seduction may end with a broken heart for Nokia.

As Horace Dediu points out, this is not the first time Microsoft has tied the knot with a mobile partner. Ericsson (2000), Sendo (2001), Motorola (2003), Palm (2005), Nortel (2006), Verizon (2009), LG (2009), Nokia (2009), and Nokia (2011, again) have all fallen prey to Microsoft’s advances. In almost every case, the romance ended in tears: Ericsson suffered losses and fled to Android, Sendo went bankrupt, Motorola suffered losses and fled to Android, Palm was rescued by HP, Nortel went bankrupt, Verizon decided to hedge its bets by hitching Android too, and Nokia’s dreams for its first (2009) marriage to Microsoft were dashed, so now (2011) it’s trying again (with Stephen Elop doing the honors both times).

Unfortunately, it’s not likely to end any better. Because the days of hardware differentiation are over. Virtually every hardware manufacturer now offers similar specifications and designs. In an age of exponentially accelerating change, hardware updates are increasingly being replaced with software updates, because the software update cycle is faster and cheaper. The hardware is merely the platform for what everyone is really after—cool software, embedded in a rich ecosystem of services and social media.

And Windows Phone 7 just doesn’t cut it. (Investors appear to agree—Nokia’s shares fell off a cliff today after the announcement—see the chart.) Three years after Apple pioneered the touch interface, Microsoft still has not caught up. The real differentiator is the user interface, and users aren’t flocking to Windows Phone 7. Samsung, which was pragmatically supporting four operating systems—its own Bada, as well as Windows Phone 7, Symbian, and Android—has adapted to user demand and shifted 80% of its phones to Android.

Looks like it’s increasingly down to a two-horse race between iOS and Android—with Android extending its lead.