Someone forgot to tell Microsoft and Nokia that the Internet of Things is dead

The last time Nokia and Microsoft teamed up to target a big new market, it didn’t end well.
The last time Nokia and Microsoft teamed up to target a big new market, it didn’t end well.
Image: AP Photo/Alastair Grant
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Two of tech’s more venerable names—Nokia and Microsoft—acquired Internet of Things startups recently. Nokia bought French wearables company Withings for $191 million, while the price of Microsoft’s purchase of Italian cloud specialist Solair was undisclosed. But both these tech giants, once at the top of their industries, might be expecting too much from the much ballyhooed Internet of Things.

Take the acrimonious shutdown of Nest’s smart home hub by parent company Alphabet. It sparked an angry blog post from user Arlo Gilbert, the CEO of a healthcare app company, who pointed out that the “thing” in the Internet of Things could be shut down arbitrarily by its manufacturer:

Is the era of IoT bringing an end to the concept of ownership? Are we just buying intentionally temporary hardware? It feels like it.

What drove Gilbert’s outrage is the notion that he could be left with a non-functioning object if the manufacturer decided to brick it. He had no recourse, and Nest didn’t even send him an email to warn him, he wrote. There was a sense that his rights as a consumer were being trampled in the IoT industry’s rush to dream up a network of devices that are always on and always interconnected. (Until they aren’t.)

Microsoft says its Solair acquisition is about the company’s “technology and talent“—the former will be integrated into the group’s existing IoT software package, offered through its Azure cloud service, while the latter would join the Microsoft team responsible for that software.

A look at Solair’s latest financials suggests that the talent is probably more important than the technology. The company reported €1.3 million ($1.5 million) in revenue in 2015, down from €2 million the year before. Its pre-tax loss last year, around €700,000, was much worse than the year before. The cash on its balance sheet fell to €15,000 last year, from €130,000 in 2014. Microsoft declined to comment when contacted by Quartz.

It looks like the Microsoft deal couldn’t have come at a better time for Solair. Its struggles resemble those faced by other IoT players, like Revolv, the company that made the ill-fated hub for Nest. “Nobody right now is making money at the hub level,” Revolv founder Mike Soucie told Forbes before his company was acquired by Nest in 2014. “There’s a lot of betting on the long-term future and willingness to take losses. That’s where the market is—placing bets on the future.”

Unlike consumer-facing Revolv, Solair’s software is squarely aimed at companies: helping factories monitor their assembly lines more efficiently, for example. Nokia’s acquisition of Withings is more of a consumer play, given the French firm’s line of smart scales and air-quality monitors. But Revolv’s travails and Solair’s weak financials suggest that neither approach is particularly lucrative at the moment.

Just as Nokia and Microsoft are linked by a disastrous smartphone deal (Microsoft acquired Nokia’s phone-making business in 2014), they’re now both betting that constantly connected devices will take off, whether in factories or in homes. And that’s looking like an increasingly tough sell, for companies or households.