Microsoft and Nokia are both dumb about smartphones
The acquisition of Nokia's device business by Microsoft makes sense economically, but it might not do much to help Microsoft compete with the dominant players in the smartphone market.
The economic case for the merger is rather straightforward. Both Microsoft and Nokia were rapidly developing a dangerous relationship that left each of them vulnerable to mistakes and predatory behavior by the other. As the dominant seller of phones using the Microsoft operating system, Nokia was in a position to exploit Microsoft. What's more, Microsoft was vulnerable to Nokia's failures. If Nokia's devices lag behind the devices using Android or the iPhone, Microsoft would likely lose market share.
The relationship wasn't great for Nokia either. It couldn't afford to become too dependent on Microsoft, for fear that Microsoft might abandon the market altogether or just produce software too inferior to attract customers. This meant that Nokia research and development work had to remain somewhat agnostic when it came to operating systems, which means that the hardware and software were unlikely to ever work as well as they do on an iPhone.
The merger should go a long way to solve some of these problems. The devices can be narrowly tailored to and optimized for a Microsoft operating system. Expensive precautions against opportunistic behavior can be shed. Mutual fear of exploitation gets replaced by genuine team effort.
You'll notice that one underlying problem remains: Neither Microsoft nor Nokia have smartphone expertise. Nokia is still one of the global leaders in cell phone sales, although it's been rapidly losing share to Samsung and Apple. It has valuable connections to the operators of phone networks, a vast pool of wireless knowledge, global manufacturing facilities and a widely admired supply chain management system.
None of that means that it knows very much about the future of smartphones. Nokia learned too late the importance of the kind of seamless integration of the Internet, third-party apps and mobile phones that put Apple and Samsung into such powerful positions.
(Read more: Cramer says sell Nokia)
Microsoft has understood that computing was going mobile forever. It's problem is different. It just never figured out how it fit into the world of mobile computing. Its core products in word processing, spread sheets, and presentations—Word, Excel, and Powerpoint—were designed for desktops. Some work well on tablets. None are things you can do very well on a phone. What's more, Microsoft's attachment to these products may be hindering it from embracing third-party software applications that would compete with them.
In short, Microsoft rise to market dominance in the PC software business just did not give it much experience or knowledge useful for the world of mobile computing on smartphones. Time and again it has tried to enter the mobile business but wound up looking a lot like a PC software company trying to do mobile.
(Read more: Who'll succeed Steve Ballmer at Microsoft?)
It seems unlikely that putting Nokia's device knowledge with Microsoft's PC knowledge will translate into the production of smartphone excellence. The history of technological change suggests that the company dominant in one era is unlikely to achieve that position in a subsequent era. In almost every technological transition in computing, the incumbent leader lost market share. Now that we've got two older tech incumbents in one company, the results probably won't be much different.
—By CNBC's John Carney. Follow me on Twitter @Carney.