Behind Microsoft Deal, the Specter of a Nokia Android Phone

SEATTLE — Before Microsoft reached a deal to buy Nokia’s phone business, there was a possibility that Nokia could have switched its smartphones to Google’s Android operating system sometime after late 2014.

And now, it is clear that a Nokia Android phone was more than a possibility. It was real.

A team within Nokia had Android up and running on the company’s Lumia handsets well before Microsoft and Nokia began negotiating Microsoft’s $7.2 billion acquisition of Nokia’s mobile phone and services business, according to two people briefed on the effort who declined to be identified because the project was confidential. 

Microsoft executives were aware of the existence of the project, these people said.

Another person said the idea of Nokia using Android wasn’t a part of Microsoft’s discussions with the company about an acquisition, even though that was widely recognized as a possibility.

On one level, Nokia’s Android effort is not shocking. Companies often have “plan Bs” in the works in case they need to change course on strategy or want to help negotiate better terms with partners. Getting Android to run on Nokia’s hardware was not a Herculean engineering effort, according to the people familiar with the project.

Still, a functioning Nokia Android phone could have served as a powerful prop in Nokia’s dealings with Microsoft, a tangible reminder that Nokia could move away from Microsoft’s Windows Phone software and use the Android operating system, which powers more than three out of every four smartphones sold globally.

Susan Sheehan, a spokeswoman for Nokia, declined to comment, as did Frank Shaw, a Microsoft spokesman.

Nokia reached a deal with Microsoft in 2011 to use Windows Phone on its smartphones, but Nokia had an option to exit that partnership at the end of 2014. Unraveling that deal would have been painful for both parties. It would have been devastating to Microsoft’s mobile phone efforts since Nokia accounts for more than 80 percent of the Windows Phone handsets sold. For Nokia, changing such an important ingredient in its products would have been a costly setback too.

Nokia has faced criticism that it made the wrong decision in choosing Windows Phone over Android several years ago. Nokia’s share of the smartphone market fell to 3 percent during the first half of 2013, from 32.8 percent in 2010.

There is no telling for sure whether Nokia would have been better off with Android over that time. It is possible the design of the operating system and greater abundance of Android apps might have put Nokia in a better spot.

The current status of Nokia’s Android project is unclear. Presumably, after Microsoft completes its acquisition of Nokia’s phone business early next year, there won’t be much future for it.

Source: http://bits.blogs.nytimes.com

Microsoft has gone ahead and made it official by slipping a $7.2 billion ring on Nokia's finger to acquire the Finnish company's phone business. The deal, which had been rumored for some time, puts that last big piece into place for Microsoft to have end-to-end control over the Windows Phone ecosystem. In essence, Microsoft has become Apple.

Except it isn't Apple. Certainly, the Nokia deal is basically an admission that Apple's approach in mobile — that is owning and operating the hardware, software and services around its devices — are best one. But Microsoft and Windows Phone are different animals from Apple and iOS. Besides ecosystem and market share, the companies have wildly different cultures.

True, Microsoft is undergoing a top-to-bottom organizational shift to adapt its culture, and having 32,000 Nokia employees (including 18,300 who are "directly involved" in manufacturing) will inject a little Finnish sauce into Redmond. But you don't just become Apple by adopting its strategy. And if Microsoft needs reminding of that, it should look no further than its own Surface tablets, which have failed to become the viable iPad competitor they were meant to be.

Apple, Google and Microsoft

In other ways, the deal makes Microsoft more like Google, since both companies acquired a hardware partner (in Google's case, Motorola) to give them some device clout and beef up their patent and IP portfolios (Microsoft's was actually already pretty big). At the same time, they have to keep existing partners happy. HTC, Samsung and Huawei can't be as excited about Windows Phone today as they were yesterday.

But when Google acquired Motorola, it was a struggling player in the crowded field of Android handset manufacturers. By contrast, Nokia is by far the biggest maker of Window Phones — again making Microsoft more like Apple in bringing that manufacturing in-house.

There is another pesky problem that some others have already pointed out: We already have an Apple. Smartphone users who are willing to pay a premium to buy a device with a tight ecosystem (not a healthy app catalog) have, for the most part, already done so. How can Microsoft hope to make future gains with less of the market to work with?

Rising From Asha

The answer lies in a key part of the deal, which is Nokia's feature phone business. As part of the acquisition, Microsoft gets Nokia's Asha-based handsets and the right to market them under the Nokia brand. Microsoft says it wants to use Asha phones as an "on ramp" to Windows Phones.

The Asha phones could play an important role in overseas markets, particularly places like India, Brazil, China and Russia, which a Nielsen study recently found were areas ripe for smartphone growth. While it's hard for any smartphone maker to stand out over others in these areas, there are two brands that have some pre-existing clout in those markets: BlackBerry and Nokia.

BlackBerry obviously has its own problems, and the generational shift from the old BlackBerry OS to BlackBerry 10 hasn't been much of an on ramp for those phones, at least not yet. Looking at some recent numbers, however, Windows Phone is having better luck, and if Microsoft could come up with some key services that cut across the Asha/Windows Phone divide, it could push the platform even further.

That's a big if, though, and looking at Microsoft's previous attempt at creating robust feature phones, the ill-fated Kin line, doesn't give much hope. But that product failed because it targeted the wrong market (kids) at the wrong time (the iPhone was ascendant). Played right, Asha could help solidify Microsoft's mobile game.

The Last Mobile War

Buying Nokia's device business isn't a genius move. In fact, it's incredibly obvious — but at least it puts Microsoft on par with the other major mobile platforms. That's a good thing for Windows Phone, but the question is: Is it forward-looking enough?

By emulating Apple's ecosystem strategy, I can't help but think Microsoft just put into place a great strategy for winning the last war. The smartphone market certainly still has lots of opportunity, but it's much closer to a finished work than a blank canvas. Microsoft's now ready to put its mark on mobile with Nokia's phone business, but what about wearables, data-based services and in-car integration? The biggest innovations yet to come in mobile have nothing to do with phones.

It's an interesting coincidence that Microsoft's acquisition of Nokia phones comes about a day before Samsung will debut one of the most anticipated gadgets of the year: the Galaxy Gearsmartwatch, which connects with your phone to open up entirely new experiences with apps. Which story do you think will better define the mobile in the years to come?

Source: http://mashable.com