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Nokia (NOK) understands that, as a company, it hasn’t been doing smartphones as well as it should be. That was the sentiment of its CEO, Stephen Elop, when he sent out an interesting internal memo talking about the company’s need to change strategies in the future in order to stay competitive.
So Nokia teamed up with Microsoft (MSFT). You might have heard this already. Nokia is still supporting its Symbian operating system (probably for phones on the lower end of its range), but is looking to Windows Phone 7 to be its primary smartphone OS. That’ll give Nokia phone owners access and compatibility with some of Microsoft’s other products, like its Xbox Live service and Bing search engine.
It’s an interesting move given some of Elop’s comments, which PocketGamer.biz reported on today:
"We talked to our friends at Google, and there are some attractive elements [with Android], but we felt we wouldn't be able to differentiate ourselves," Elop explained.
"There's a commoditisation risk using Android and essentially value moves out to Google."
Nokia has been losing market share to Android over the last year, and while its Symbian OS remains the top operating system for smartphones, that probably won’t be the case for much longer. Hence the Microsoft partnership, though it’s an interesting move given the fact that Windows Phone 7 holds a small chunk of the market -- less than 4 percent.
But Elop’s comments about differentiation is a telling one: Android is a powerhouse in its own right, and the OS defines many of the devices that are found on it. Windows Phone 7’s lower popularity gives Nokia the ability to sell Nokia phones, with the OS taking something of a back seat. But it’s still a name brand with some recognition behind it, and Microsoft’s suite of features adds to the selling points.
And he’s probably right about Android; the OS has a tendency to swallow the devices that go on it, overshadowing their makers’ brands in favor of the Google (GOOG) name. But is Microsoft going to add any value to Nokia, given that the diminishing front-runner is pairing with the guy in last place?
Nokia seems to think so, but unless it’s going to bring something more to the table than just Windows Phone 7 -- which had a big CES presentation that largely amounted to filling in features other smartphone systems already offer -- it’s going to take a whole lot more on the part of the two companies to battle back the Android juggernaut.
I’m interested to see what Nokia comes up with, especially if it wants customers to go to stores looking for Nokia phones rather than Windows Phone 7 phones, and coming out with a Nokia model by chance. The company has to realize that Windows Phone 7 isn’t a brand that’s selling many phones right now -- which suggests the strategy will entail some other changes. I wonder if Nokia will try to price its phones significantly lower than other smartphones, in hopes that customers will take a gamble with Windows Phone 7 as that OS adds features and becomes stronger in general.
Nokia backed off from Google because it was afraid it wouldn’t get a fair deal on the value of the OS, but the decision to go with Microsoft might be the other end of the spectrum: Nokia gets more out of the partnership, but loses all the potential customers. Android isn’t slowing down any time soon. Unless Nokia’s bringing more firepower to the fight, it could up humbling itself to the Android nation before too long. There’s a reason so much of the Android value is being pushed to Google, as Elop puts it: people are buying Android products, and in droves. Nothing about Nokia’s situation seems like it’ll pull customers away from Android’s gravity, at least not yet.
Nokia might end up reconsidering its decision not to partner with Google before long.