Is Nokia trading a losing mobile platform for an even bigger loser in Microsoft?

Nokia (NYSE:NOK) brought Stephen Elop down from the mountain, and Elop brought the mountain to Nokia.

This must have been planned from the beginning right? The Nokia board must have had just this outcome in mind when they lured Elop over from Microsoft (NASDAQ:MSFT)--or as the conspiracy buffs now might posit, when Microsoft planted Elop at Nokia.

If that was the case, why all of pageantry? Why the farce of trying to recover the ailing Symbian platform? Did Elop really need to sit on the sidelines for another two quarters of disappointing results before he could pop up to say “I told you so.”? This deal must have been in the works from the moment Elop stepped through the well-insulated glass doors of Nokia HQ, if not long before. If so, why send out the now infamous memo that basically tells all of Nokia’s employees that the work they’ve doing for the last few years was for naught? To quote Elop in the memo acquired by Engadget:

“The first iPhone shipped in 2007, and we still don't have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.”

Yes, unbelievable. We’re expected to believe that Elop was so disappointed in Nokia’s Q4 performance and recent market share fall that he just threw up his hands, deciding to junk Symbian on the spot? Criticizing your employees’ performance in order to motivate them to do better is one thing, but trashing your employees and then flushing their life’s work down the toilet is another. Methinks you need to work on your people skills, Mr. Elop.

That brings us to the big question: will this unholy alliance of two former competitors work?

You may recall that before the days of the iPhone and Android, Nokia and Microsoft were pitted against one another, trying to establish their own pet operating systems in the infant smartphone market. Nokia won that war easily. That brings up a big point: Microsoft has built nothing but flops in the smartphone space. Several generations of Windows Mobile went down in flames. Let’s not even talk about the Kin. Microsoft has all kinds of excuses for why its products failed to take hold in wireless, but it usually ignores the obvious one: it’s a PC OS maker trying to impose its Windows will in the mobile world.

Windows Phone 7 may prove to be the exception. Due to Microsoft’s past blunders, the launch was greeted with a lot of skepticism, but Microsoft won over many of those critics. The general consensus is Microsoft may have its first winner in WP7. But having a good OS doesn’t guarantee success. Just ask Palm. By all accounts its WebOS was one of the most innovative in the market, yet it couldn’t sell more than a handful of Pre devices. HP (NYSE:HPQ) now hopes to revitalize WebOS, using its tremendous scale and close integration with the PC to go places Palm could never go alone. Microsoft probably feels the same way. It’s an enormous company compared to Palm, but it still needs a sugar daddy phone (hardware) maker. It’s landed some good deals with the other handset OEMs, but I get the impression Samsung’s first love will always be Google’s (NASDAQ:GOOG) Android. Becoming the exclusive OS for the world’s largest phone maker is just the kind of commitment that Microsoft needs to rise from the bottom of the smartphone heap.

What does Nokia get out of this? It certainly gets a new operating system, one arguably well more advanced than Symbian and one that most certainly has a more compelling user interface than Series 60. But Windows Mobile’s market share is small, and WP7, which launched late last year, is even tinier. In fact, it’s so new we don’t even have any numbers on shipments. Microsoft is counting on Nokia to build WP7’s market share, not the other way around.
Just as Nokia’s reputation has suffered due to its subpar OS in the smartphone wars, Microsoft’s reputation has been suffering far longer. WP7 is rebuilding Microsoft’s mobile reputation in part, but Microsoft’s overall reputation as an innovator is suffering due to several botched PC Windows releases. It’s no coincidence that Apple’s (NASDAQ:AAPL) meteoric rise in the smartphone coincides with the Mac flourishing in the PC market. Perceptions can conquer technology any day of the week. There’s a good chance that Nokia is trading in a losing operating system for an even bigger loser.

Finally, will this partnership even work? Success will depend on execution, and that means getting Nokia employees on board. Obviously they have little choice in the matter, but in the early days of Symbian all of these people were taught to believe they were the anti-Microsoft. They believed they were doing something special in building an OS from scratch to address the specific needs and hardware limitations of the mobile phone, while companies like Microsoft were trying to recreate the PC in miniature. The allure of that dream has probably faded due to Symbian’s recent history, while Apple and Google have replaced Microsoft as the principle villains, but I doubt that a company of 120,000 people who proudly call themselves Nokians are going to swallow whole the new Microsoft story.

In 2009, Nokia Siemens Networks gave Connected Planet access to some of the key executives that shepherded the integration of the two company’s infrastructure arms for a story we wrote on the challenge of merging disparate corporate cultures. Adrian McClean, an outside consultant brought in by Nokia to address cultural issues, produced a set of graphical representations of Nokia’s culture to help the company better understand how its employees saw themselves. Nokia was of a school of fish, the implication being that the employees worked in almost a commune like atmosphere.

“What this represented was the values-driven, self-organizing capacity inside Nokia,” McClean said. “A lot of people had a sense of having freedom, but the coordination occurs through adherence to some strongly felt and shared values.”

Depending on what business philosophy you espouse, you might find that explanation very compelling or you might think it’s a bunch of hogwash. But if there is any truth to it, you could easily see how the Microsoft partnership might be doomed to fail. A company whose employees disdain hierarchy and are accustomed to coming to decisions collectively is likely to reject a top-down strategy implemented by an outsider, especially when that outsider has just voided all of their work of the last 10 years.

That said Microsoft has agreed to give Nokia a certain amount of control over the direction of the operating system. Microsoft’s culture is also unique, a meritocracy that rewards innovation. If Microsoft keeps its promises and allows Nokia engineers to make a sizable contribution to WP7, there may be some hope for this partnership.