Google Gives Microsoft a Boost in race to Bottom Price

Google buying Motorola could be a big boost for the Microsoft/Nokia alliance hopes to make Windows Phone 7 a viable candidate as a mobile OS. The race to the bottom is on, and any of the three can win it.

Android is winning

The first thing you have to understand is that Android is winning. Not by having the best handsets, though they are close, or the best OS, not that close, but by having the best prices and options. The talk about fragmentation is a red herring, choice is good, except for the geeks. The point is not whether the Galaxy S is as good as the iPhone 4, or if the Galaxy S II is even better, the question is whether the LG Optimus One is an Ok phone for a normal person. The LG costs about 99$, less with carrier subsidies. For 50$ or less it is very difficult to find fault with this phone. Yes, it is not fast, the camera is crappy, the screen small and not great. But, guess what? it doesn't matter! for 50$ or less, you can run pretty much any app you may want from the Android market and have a phone that doesn't look half bad and works ok. For a common person.

It seems pretty obvious that that's the ticket. Who can get acceptable phones cheap enough so that its inadequacies to not matter. That's the race to the bottom and it is important, but there is more than one way to win it.

Apple's way to the bottom

Apple makes well designed cheap computers and sells them for a very high price, but that's not the (new) Apple way. Apple sells iPods, Phones, tablets, and Airs which are very well designed, top of the line products less expensive than any competitor. Yes, the Air is not a computer, not in the traditional sense. It is a new kind of device, that has little internal storage, and everything else a computer has. It depends on the cloud and it is very small. Other computer manufacturers have nothing of the kind and in the past they have not been able to make similar stuff cheaper than Apple can. That's the story with the iPhone, any comparable phone costs the same, or more! That's the story with the iPad... And that's the older story with the iPod, which because of its age represents, I think, the real genius behind Apple way of racing to the bottom.

The iPod is the best Mp3 player, surrounded by the best ecosystem, it is the best podcast player, and it is still one of the cheapest players. So, how come other manufacturers can't imitate Apple? They can beat Apple in price, that's step one. Step two is more important, Apple has manage to convince the public that an Mp3 player most have a bunch of features. Most of those features are used by a minority of users, but for each of these users that's the feature that makes the iPod the best. I am talking about the iPod as if it was a product, but one of the great things about the iPod, as opposed to, say, the Zune, is that there is an iPod for each occasion. Furthermore, you can interchange them while keeping them in synch. That's the brilliance of Apple genius. They race to the bottom, under certain conditions.

There is, of course, no guarantee that Apple will make the same strategy work in the case of the iPhone, the iPad, and/or the Air, but they are well in their way. iPhone is the closest to getting there and the only threat is Android, until Google buys Motorola and opens a crack for Windows...

Windows Phone 7 has a chance!

That's way more than you could have said yesterday! Yesterday the story was, either Apple wins or Android steals the show by going cheaper and convincing people all the other stuff that Apple gives are just frills that make the product more expensive. Despite the nice quotes from Google partners, every single one of them have to be thinking, is Google going to screw me in the future? How do I hedge my bets? The best way, currently, is to make Windows Phone 7 handset. Most of them already do that. What they really have to do now is push Windows mobile so that it becomes a third competitor they can run to if Google misbehaves. This will make Nokia strategy, the race to the bottom, faster thanks to competition. Windows Phone 7 is good enough that once people start using it, they will start to prefer it. Now, for Android this is a problem... having 40% plus of the market share, this points to a reduction in market share as the market grows. For Apple it's an opportunity, if there are three big players you need less to be close to the top one, and that's all Apple wants... Well, that and taking the Lion (pun!) share of the profits, which is the center of their strategy. For Microsoft, and to a lesser extend to Nokia, this is a windfall! They have what? 5% or less of the market? If they get 15% and become the third player two things happen... The plattform is viable and people starts considering it. The rest is sustaining, and improving, the quality of handsets and OS.

So, with this acquisition Google may get patent protection, but they have given a boost to a third player that directly competes with them. Apple has to keep performing flawlessly, but that seems to be a given nowadays, Microsoft has a chance of making this Nokia deal the biggest comeback history since... well, Apple's! Google is in dire straits, and that is not even counting the headaches from gobbling a monster of Motorola size, history, culture and progression. Of course, the biggest loser is still RIM.





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