Nokia Corporation (ADR) (NOK): Heavy Headwinds Against Microsoft Corporation (MSFT) in Mobile

The network effect is a key competitive factor in the mobile business. Developers prioritize platforms which provide access to big masses of users, and users choose those platforms which include all the popular apps. Users attract developers and vice versa, that´s why achieving critical mass is of utmost importance when it comes to creating a competitive mobile platform.

Google Inc (NASDAQ:GOOG) makes many of the most popular native applications in the world like Gmail, Maps, YouTube and Search among many others, and the company makes them available for both Android and iOS.

But Google Inc (NASDAQ:GOOG) doesn’t make most of its apps available for Windows Phone, users can find some third party alternatives to native Google applications, but that’s still a material disadvantage for Microsoft in mobile. Google can’t afford to keep its apps away from Apple Inc. (NASDAQ:AAPL) users, but things are different when it comes to Windows Phone and its small market share.

In mobile, winners tend to keep on winning due to the network effect. Microsoft will need to build some truly great products if it’s going to overcome this disadvantage. Considering the company’s experience in mobile over the last years, the odds are not looking very good.

Bottom line
Microsoft has made an aggressive move by acquiring Nokia´s smartphone business, the company will likely lose support from other partners, so succeeding with its own integrated products is now of utmost importance.

The network effect represents a strong disadvantage against Microsoft in mobile though, and the company doesn’t have a great track record when it comes to acquisitions or hardware, so things could be getting worse before they get any better for Microsoft investors in the middle term.

The article Heavy Headwinds Against Microsoft in Mobile originally appeared on Fool.com and is written by Andrés Cardenal.

Andres Cardenal owns shares of Apple and Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.

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