Declaring Platform Bankruptcy: Does it make sense?
We’ve known for some time that Nokia was having trouble adapting to the post iPhone world, but dismal financial results coupled with Android coming close to or passing Symbian in marketshare caused these issues to come to a fiery head this week. If you haven’t read the burning platform memo from Nokia CEO Stephen Elop, I highly recommend you read it now.
The big question is what happens tomorrow (or tonight if you live in the United States) at Nokia Capital Markets Day where Elop will present the new strategy for Nokia. Will Nokia declare platform bankruptcy and replace Symbian and/or Meego with Windows Phone 7 or Android?
By morning we’ll know what direction Nokia is headed. But before we know the results, I want to ask whether declaring platform bankruptcy is ever a good idea.
I’ve heard pundits argue for months that Nokia and RIM need to ditch their old platforms in favor of a completely new operating system like Microsoft did with Windows Phone 7. There’s no denying that both the Blackberry OS and Symbian are long in the tooth and ill-suited for today’s mobile competition.
But the track record for declaring platform bankruptcy doesn’t look so good. We have four companies in mobile that needed to decide what to do with their legacy platforms. Two of them—Microsoft and Palm—declared platform bankruptcy and shipped entirely new operating systems. How has that worked out?
For Palm, it meant a near bankruptcy of a different kind before they were purchased by HP. For Microsoft, it has seen it’s share of the mobile market plummet from 12% in 2007 to 4.2% in 2010. So far, Windows Phone 7 hasn’t been the hit Microsoft hoped it would be.
To date, RIM and Nokia have pursued a different strategy. They have continued to prop up their legacy platforms (Blackberry and Symbian) while preparing their new platforms (QNX and Meego).
They’ve described how applications will be able to transition from the old platforms to the new old ones. QNX will run Blackberry apps in a compatibility mode and Webworks will work on both. Nokia has championed QT as the cross platform solution that will work for both current Symbian and future Meego devices.
None of this is to say that RIM or Nokia is definitely going to succeed whereas Microsoft and Palm are doomed to fail. But there is an common desire on the part of technologists to declare that something needs to be rewritten from scratch. Resisting that temptation can be difficult especially if you’re in a competitive and volatile market like mobile phones.
But for as much as the pundits declare Nokia and RIM unable to compete with the iPhone, their strategy of gradual transition is the same strategy that Apple employed when making the transition from Mac OS 9 to Mac OS X.
Apple bought NeXT in December of 1996. That purchase signaled that its internal efforts to create a new, modern operating system had failed. They needed to move to a completely new operating system based on NeXTSTEP to compete.
Yet, despite buying their new operating system in 1996, they didn’t stop selling computers with the old operating system. In fact, Apple shipped the initial release of OS 9 in October 1999, nearly three years after buying NeXT. They shipped seven updates to OS 9 over the next two years.
The first version of the new operating system, Mac OS X, shipped in March 2001—over four years after NeXT was purchased. But the new operating system included a compatibility layer called Classic that allowed OS 9 applications to continue to run.
The last remnants of the OS 9 platform finally disappeared when Classic was removed in Mac OS X v10.5 released a decade after the NeXT acquisition.
Mobile is moving much more quickly so neither RIM nor Nokia have five years to release a new operating system nor a decade to purge the previous one. But is it really a bad business decision for RIM to continue to ride their current OS as long as possible while readying their next platform?
So long as they continue to sell well in international markets, they would be foolish to ditch their existing platform prematurely.
They can ride out some decrease in market share as long as they are thick skinned when the press tells them they need to deviate from their plans. I don’t know how long they have to work with, but pundits had it in for Apple before it was able to turn it around with the iMac and later OS X and RIM isn’t nearly as desperate as Apple was at that time.
Finally, RIM only purchased QNX in April of last year. Yes, RIM should have acted sooner to develop or purchase their new OS, but the fact that they plan on shipping the PlayBook using a QNX-based OS in Q1 of this year is remarkably fast compared to the time required for Apple assimilate NeXTSTEP.
As for Nokia, they are in a much more difficult situation than RIM. Their profits have diminished. Elop’s memo refers to being put on a negative credit watch. There is a lot of justifiable pressure from shareholders for Elop to take action.
We’ll know soon what Nokia chooses, but we won’t know for some time whether or not it is the right strategy. While Apple’s operating system transition is informative, it doesn’t guarantee that either RIM or Nokia will be able to succeed doing the same.
As a developer, I would love both companies to ditch their legacy platforms tomorrow. Old Blackberries in particular give us nothing but grief.
But as a business strategy, I don’t know that declaring platform bankruptcy makes sense.
In a selfish way, I hope Nokia sticks to its guns on its planned migration from Symbian to Meego if for no other reason than we’d have two companies that chose to ditch their platforms abruptly and two that chose a gradual transition. It would be our very own platform strategy petri dish.