Microsoft Moves to Copy Apple and Google

NEW YORK ( TheStreet) -- Microsoft's ( MSFT) acquisition of Nokia's ( NOK) smartphone business should come as no surprise to those who have watched Microsoft over the last year. The strategy has turned into copying Apple ( AAPL) Apple and Google ( GOOG) more and more, and for good reason.

Let's count the ways:

Stores: People have been making fun of the Microsoft stores because nobody seems to be actually buying anything there. I think that's a little bit unfair as it's still early in the game. Microsoft has made the only serious attempt at copying the fantastic Apple stores, and it just needs to drive this strategy with hundreds of more stores combined with more attractive products.

Basically, ask yourself: Why shouldn't Microsoft copy the Apple stores? Of course it should! In fact, it should have had hundreds of them by 2007-2008. Hey, better late than never.

What about Google? The good news for Google is its products -- Android and Chrome OS -- basically don't need any customer service. They're so easy to use and set up that you don't need to deploy an army of stores and "geniuses." So that's the good news.

The bad news for Google is its products remain unknown to most people, despite its mushrooming Android smartphone market share. Most people, for example, don't know Google sells laptops. Therefore, Google needs stores not so much for customer service but as showrooms. The logical thing to do in order to get a quick start here would have been to acquire Best Buy ( BBY). I guess Google wishes it had done that in December.

Phones: Apple and BlackBerry ( BBRY) have their own hardware. Google owns Motorola, but Motorola is only a tiny percentage of Android sales. In addition, Google makes its own laptop while relying on Samsung, Acer, HP ( HPQ) and Lenovo for the bulk of its laptop sales. Google also makes its own Glass and Chromecast hardware products.

Microsoft has its own Xbox, and has made peripherals such as keyboards and mice for a long time. One year ago, it launched the Surface tablet-with-a-keyboard. Basically, it was a disaster resulting in a huge write-off. A new Surface family is expected to launch in mid-October, optimized for Windows 8.1.

Microsoft's rationale for buying Nokia's phone business was easy and two-fold:
  • It had to. Nokia was going to diversity into Android, dealing a potentially lethal blow to Windows Phone's credibility. Microsoft was faced with the choice to either pay Nokia a huge sum of money to abstain, or simply acquire the business. Given these options, Microsoft most likely did the right thing.
  • It makes sense. Look at the broader industry dynamic and logic. Microsoft was already developing its own phone that the Chinese ODM/OEMs would have made for it, just like the Surface tablet. You can't look at Google and Apple and conclude that you need to defy their winning industry logic.

Cloud-device integration: Google is the clear leader here with Google Docs. No product of its kind is so easy to use, works as quickly, and is free to boot. When I decide on where to type this article, the choice is easy.

Apple and Microsoft have been scrambling to take on Google Docs, repurposing their existing productivity suites into the cloud. There is no denying that, as a result, they have narrowed the gap against the market leader, Google.

For Microsoft, this is as critical as the smartphone business. If the rationale for end-users to use Microsoft Office continues to decline, the entire Microsoft pyramid stack of expensive software flies out the window.

Microsoft has improved the PC situation dramatically with Windows 8 and its integration with SkyDrive. The company is now one step closer to competing with Chrome OS and Android in terms of being able to quickly switch from PC to PC, from device to device.

Still, a meaningful gap remains. For those of us who use many dozens of Google, Apple and Microsoft hardware products of all shapes and sizes every day, it's easy to see how superior Google's cloud sync remains. The good news for Microsoft is that in just the last 10 months, since the launch of Windows 8 and Windows Phone 8, it has moved ahead of Apple in terms of the cloud sync.

The bottom line: Microsoft did the right thing.

Microsoft had no realistic choice but to acquire Nokia. If there is to be an alternative to Apple and Google in the mobile world, Microsoft had to pull on the big boy pants and play like the big boys.

Will this move be successful? Compared to what? My argument is that the alternative was almost-certain failure. Competitive industrial logic drove this transaction, from Microsoft's side.

The relative failure of Windows Phone to date comes down to two things:
  1. Too late. Just like BlackBerry, taking too much time to react to the 2007 launches of iPhone and Android doomed the situation. Chalk it up to complacency, or whatever you want to call it -- lack of innovation, not enough imagination, you name it.
  2. Partially following from being too late, Windows Phone isn't competitive with Google and Apple in the apps game. This is crucial. Most people agree that Windows Phone is competitive as an operating system. It's not enough to have 200,000 or 300,000 apps when the competition has one million.

"But almost nobody uses more than 30 apps" is something you often hear. So, having 300,000 available is clearly enough.

Wrong.

If 10 or 20 out of the 30 you use are among the 700,000 apps Windows Phone doesn't have, then it's game over. Heck, even a single one can break the case. I'm looking at you, Google.

So what is Windows Phone to do? There is no easy answer here. With BlackBerry on the death bed, at least it's now crystalized as to which is the number 3 operating system. Also, in the past Microsoft has spent millions on courting developers. Going forward, what if Microsoft simply spent billions courting developers? Does Microsoft have any more urgent spending priority?

The task facing Microsoft is monumental. It's doing all the right things, strategically. The problem is in product development, product definition, and product management. If the products aren't ahead of Google and Apple overall -- and perhaps not even on par -- having the right strategy, such as copying the Apple stores and acquiring Nokia's phone business, will simply not be enough.

As Winston Churchill said, sometimes it's not enough to do your best -- it's only required that you do what is necessary. When you compete with what I believe are the two best companies in the world -- Google and Apple -- it's not enough that Microsoft does its best.

At the time of publication the author was long GOOG and AAPL, and short MSFT.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.