Nokia retreats into its manufacturer roots and gives the keys of his kingdom to Microsoft: Symbian, purposely created to hold Microsoft back from the mobile space, much to the ire of Gates, is gracefully terminated by a Microsoftie in exchange for a promise of a better mobile operating system in the future and hundreds of millions of dollars in kind. The transition will be so hard that Nokia will not provide any forecast for the full year and the stock has fallen 15% on a day: a master deal for Microsoft, a disaster for Nokia. No software, no soul.
The economics underlying mobile operating systems and their adjacent ecosystems are very different from the PC space: more complex, faster releases, costlier product recalls, energy constrained, lower margins.On a typical PC, >30% of its price goes to Microsoft; on a smartphone, less than 7%. That is, the incentives to get a perfect OS release from day one are much lower, and that for a company that is used to deliver good software after 2–3 versions. Only the much better post-handset-sale incentives of monetizing mobile apps through advertising can align the two companies to succeed on this new deal, except that this model is very disparate to what Microsoft is used to.