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TheStreet Open House

Nokia and Microsoft: The Tables Have Turned

Stocks in this article: MSFTNOKDELLHPQSNYIBMAAPLGOOGYHOO

Shortly after Nokia launched its first Windows Phone in the U.S. in 2012, however, something earth-shattering, yet quietly, began to happen: The non-Nokia Windows Phone licensees begun to falter.

Basically, all non-Nokia licensees of Windows Phone gave up, or almost gave up. LG Electronics surrendered after an initial launch. Samsung offers a couple of models but doesn't seem to bother marketing them. HTC offers a great model, mostly so they can reduce the impact from Microsoft's patent lawsuit. Acer... well, they were supposed to launch a model, but... Huawei? They showed a model at some trade shows, and then...

The bottom line is that Nokia is now -- depending on whose survey you count -- around 80% of all Windows Phone shipments, and is rapidly racing to 100%. Unless something changes quickly, Microsoft's licensing program for Windows Phone has become a joke, with de-facto only one customer.

It's gone so far that many analysts now estimate that Microsoft makes more money from Android phones than Windows Phones! After all, Microsoft gets a royalty from a very large percentage of the Android smartphone market.

With Nokia now at 80% of the Windows Phone market, rapidly approaching 100%, the two dangers to Microsoft's smartphone business are:

1. Nokia switches emphasis to Android -- or something else, for that matter:

Whoops! Nokia has been saying that they don't have a "Plan B" -- beyond Windows Phone. Maybe they hadn't -- in 2011 or early 2012. But now? If you don't believe Nokia has an active Plan B in place, you are probably naive.

Most likely, such a Plan B would involve Android. Perhaps it involves acquiring BlackBerry (BBRY). Perhaps it would involve acquiring BlackBerry and making a great Android phone with a BlackBerry keyboard. The possibilities are endless. Either way, Microsoft is screwed.

2. Nokia gets acquired.

Whoops again! Whether Huawei, Lenovo, Samsung or HP, Microsoft's only remaining outlet for Windows Phones may be gone. Microsoft would be screwed.

In this light, at some level, it doesn't take a lot to scare Microsoft into acquiring Nokia. Problem is, even if Nokia isn't acquired, it can still abandon Windows Phone.

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