1. Apple and Google are (and were at the time of the Nokia acquisition) larger companies than Microsoft. Microsoft's usual tactics are to throw their weight around, which they can't do when they're the smallest dog in the fight. What's worse, mobile represents a huge amount of revenue for both companies, so they have both the incentive and the ability to outspend Microsoft. Microsoft doesn't have a lower cost base (if anything, it's the opposite) so they have no basis for a sustainable advantage. Mobile was never a huge revenue number for Microsoft, so they always have the option of walking away.
2. Apple and Google also have the vast majority of the market covered from a value proposition standpoint. Apple goes after the high-margin top end, and Google uses an arms-dealer model to go after the middle and low end. What value proposition does Microsoft have that is substantially different? If you can't differentiate your product, and you have the disadvantage of being smaller in a market with strong network effects, you have no basis for a sustainable advantage.
3. The market had already started to mature by the time Microsoft bought Nokia. While you can get in early in a growth market and out-grow the competition, it's an uphill battle if you're as late as Microsoft was. Your competition will still outpace your gains even if you outspend them by a significant margin.
4. Building a niche product (i.e. if you can't be #1 or #2) can still be a profitable strategy, but it is a bad idea for a company like Microsoft. If nothing else, it's a distraction from their core moneymaking activities. Their first instinct would be to leverage their existing platforms to build user share, which would be a negative thing for Microsoft's existing platforms by creating opportunity for competitors as Microsoft's users search for alternatives (see Office on iPad). And because Microsoft has a decentralized power structure, there's not much they can do to prevent this. They're better off not playing in the mobile space at all than aiming to be a niche #3 -- let a smaller, more focused player with a lower cost base take on that role.
At some point, Microsoft will realize that mobile is a game they will never win. While they would be in a much better strategic position if they had a strong mobile presence, wishing that will happen won't make it so. IMO their optimal move is to get in bed with both Apple and Google and make BYOD really awesome if your company uses Microsoft as a back office. Apple would do it because they have little to no presence in the enterprise tech space, and Google would have to do it because otherwise Apple would become the de-facto standard in corporate mobile phones. That position leaves Microsoft with other options and leverage over the industry, which they currently don't have sitting at the bottom and looking up saying "me too!" It's also very hard to do any of this if you're in direct competition with Apple and Google on the OS/handset side.
Yes; with Excel there was a realistic chance because PCs were an exploding market at the time, and network effects (speaking in a business sense) were far weaker due to the fact that PCs weren't able to communicate. The market also took a lot longer to mature than the smartphone market did. Microsoft has always taken a "fast follower" approach to emerging product categories, but this time they were just too slow. I'm not saying they never had a chance, but the writing had been on the wall for a long time when they made the Nokia acquisition.
Also, Microsoft was a very different company in the 80s. They were a scrappy startup that had to prove themselves, and didn't have any legacy products, cost structures or business models dragging them down.
I'm not saying it's impossible for a company to be successful in the smartphone space as a solid #3, just that it's a bad idea for Microsoft to try to be that company. It's too far from their core competencies, and it clouds the strategy for their cash cow products.
IMO the majority of the value of Microsoft as a company at this point is their enterprise sales network. The relationships they have there are essentially a machine that lets them print money year after year. Consumer electronics (like cell phones) don't let them take advantage of their most valuable asset.
Instead of trying to chip away market share from Apple and Google, Microsoft should be going for the jugular against IBM and Oracle in the enterprise space by getting Microsoft enterprise applications on every phone, tablet and browser they can. Because that's the part of the company that makes money, and what they've done over the last 10 years is essentially try to leverage their high-margin enterprise software business to create a low-margin consumer electronics division. It's insane, and while I understand the need for products like Surface to create a baseline for quality with their OEM partners, it also doesn't make sense to sacrifice your profitable businesses to try to make those other products a success.
Yeah, I'm not saying network effects were non-existent... but it's hard to change your document format and lock your competitors out if every software update has to be shipped physically on a floppy disk. The world is different now; platform network effects are much stronger because the platforms can adapt themselves on the fly to competitive pressures.
Excel won if for no other reason than Lotus losing their ability to write new, working software after their first version. While Apple is having problems in that area, Microsoft nowadays seems to be as challenged or more, and I gather Google still does this very well.
1. Apple and Google are (and were at the time of the Nokia acquisition) larger companies than Microsoft. Microsoft's usual tactics are to throw their weight around, which they can't do when they're the smallest dog in the fight. What's worse, mobile represents a huge amount of revenue for both companies, so they have both the incentive and the ability to outspend Microsoft. Microsoft doesn't have a lower cost base (if anything, it's the opposite) so they have no basis for a sustainable advantage. Mobile was never a huge revenue number for Microsoft, so they always have the option of walking away.
2. Apple and Google also have the vast majority of the market covered from a value proposition standpoint. Apple goes after the high-margin top end, and Google uses an arms-dealer model to go after the middle and low end. What value proposition does Microsoft have that is substantially different? If you can't differentiate your product, and you have the disadvantage of being smaller in a market with strong network effects, you have no basis for a sustainable advantage.
3. The market had already started to mature by the time Microsoft bought Nokia. While you can get in early in a growth market and out-grow the competition, it's an uphill battle if you're as late as Microsoft was. Your competition will still outpace your gains even if you outspend them by a significant margin.
4. Building a niche product (i.e. if you can't be #1 or #2) can still be a profitable strategy, but it is a bad idea for a company like Microsoft. If nothing else, it's a distraction from their core moneymaking activities. Their first instinct would be to leverage their existing platforms to build user share, which would be a negative thing for Microsoft's existing platforms by creating opportunity for competitors as Microsoft's users search for alternatives (see Office on iPad). And because Microsoft has a decentralized power structure, there's not much they can do to prevent this. They're better off not playing in the mobile space at all than aiming to be a niche #3 -- let a smaller, more focused player with a lower cost base take on that role.
At some point, Microsoft will realize that mobile is a game they will never win. While they would be in a much better strategic position if they had a strong mobile presence, wishing that will happen won't make it so. IMO their optimal move is to get in bed with both Apple and Google and make BYOD really awesome if your company uses Microsoft as a back office. Apple would do it because they have little to no presence in the enterprise tech space, and Google would have to do it because otherwise Apple would become the de-facto standard in corporate mobile phones. That position leaves Microsoft with other options and leverage over the industry, which they currently don't have sitting at the bottom and looking up saying "me too!" It's also very hard to do any of this if you're in direct competition with Apple and Google on the OS/handset side.