Until Microsoft's acquisition of Nokia is formally approved early next year, the two companies will continue their "co-opetition" in the tablet and smartphone businesses while IT buyers continue to marginalize their efforts.
The two companies continue business as usual despite the acquisition plan, and later this month, each will introduce new versions of their respective tablet PC. Microsoft will disclose on Sept. 23 follow-ups to its Surface Pro and its Windows RT-based Surface. On Sept. 26, Nokia is expected to debut its Sirius ARM-based tablet, along with a phablet version of its ARM-based Lumia smartphone called Bandit.
No one seems interested in a Nokia phone anymore.
How much damage the co-opetition brings to each company's respective product lines is unclear. But it shouldn't result in widespread purchasing delays, given the low market share each company holds in both the tablet and smartphone markets, IT industry insiders said.
"Among the IT engagements I deal with, no one seems interested in a Nokia phone anymore," said Mike Drips, an IT professional in Houston who specializes in Microsoft platforms. "I don't see purchasing decisions being delayed if someone wants to buy a Microsoft phone or tablet. I don't see either of these announcements generating any real excitement like the Apple [5S and 5C] announcements will this week."
Other observers suggest the two companies can avoid cannibalizing the other's product, at least in the tablet market, if Microsoft positions the Surface Pro 2 to higher-end, corporate buyers and Nokia to lower-end consumers. Such a positioning may make sense, at least for the short term, given that their distribution channels cater to their respective strengths.
But even if Microsoft makes inroads into enterprises with the Surface Pro 2, some believe it must succeed in the consumer markets with the lower-end Surface 2 given the continuing bring-your-own-device trend. This would bring the Surface 2 into direct competition with Nokia's Sirius tablet.
"Further penetrating the consumer market will be important for Microsoft to expand its footprint in the enterprise," said Eric Klein, senior mobility analyst with VDC Research Group Inc. in Natick, Mass. "It also helps them in getting enterprise mobility management vendors to support the Windows Phone platform in the upcoming releases."
Despite the pending Nokia buy, Microsoft's ability to attract handset OEMs such as HTC, Huawei, Nokia and Samsung to the Windows Phone 8 platform continues to be important, Klein said.
"The company will need to maintain relationships with these OEMs moving forward to remain competitive in the market," he said.
Microsoft's mobile footprint challenge
The deal can only help Microsoft because of Nokia's footprint in the Asian and European markets, Klein added. Major carriers in the U.S., like Verizon and AT&T, mainly focus on iOS and Android.
"The handset market is super competitive right now, and so Microsoft's challenge is getting Americans interested," Klein said. "They have quality smartphones and are very well-built, but the fact is they have to figure out a way to get them into people's hands."
Hardware can also be a problem for Microsoft moving forward, Klein added. In the past, the company has had great relationships with OEMs such as Hewlett-Packard and Dell Inc. But as those companies competed against Microsoft in the mobile market, those comfortable, decades-long relationships changed.
The other challenge for both Microsoft and Nokia is getting developers to create apps for Windows 8.1, Klein added. While Microsoft has attracted a fair number of tier-one developers for its Windows 8 tablets and phones, including Facebook and Twitter, they'll need even more to be competitive with Apple and Android platforms.
"Developers can drive a lot of innovation on these devices," Klein said. "You need developers to develop powerful apps that bring that volume in, and [Surface and Windows Phone] doesn't have the volume that Apple and Android [have] in order to attract those developers for Windows 8," Klein said.
The reason Microsoft has failed thus far in the mobile market is that they did an inadequate job optimizing the mobile experience, said David Cearley, vice president at Gartner Inc. in Stamford, Conn. Microsoft tried to force-fit the Windows desktop/laptop experience onto mobile platforms, he said.
"They were both early and late to smartphones and tablets," Cearley said. "They had early forms of Windows phones and tablets, but they simply tried to replicate the Windows experience for the phone. Apple and Google, on the other hand, reinvented the experience by changing the user interface and user experience."
Upcoming Windows/Nokia tablet features
The new Windows RT 8.1 tablet, to be called Surface 2, will feature the next-generation NVIDIA Tegra processor, a full 10.6-inch high-definition display, front- and rear-view cameras, a full-sized USB 3.0 port, support for up to 64 GB of memory, and a two-position kickstand.
The Surface Pro 2 will have Intel Corp.'s Haswell-based i5 processor, which should improve battery life when compared with the first model, and it will support up to 8 GB of memory (twice as much as its predecessor), have a two-position kickstand and have Windows 8.1 pre-installed.
Nokia's Sirius tablet, which has a similar design to its line of Lumia Windows phone products, features a 10.1-inch screen and a 6-megapixel camera, which is fueled by Qualcomm's quad-core Snapdragon 800 processor and have 2 GB of memory, according to published reports. The Finnish smartphone maker is also planning to ship a keyboard with the new tablet that contains a battery to help with added charging.
Nokia will also take the wraps off its next-generation phone that will run Windows 8.1 and unveil the tablet at a launch event in New York.