Watching the online stream of a news conference last week from the Mobile World Congress in Barcelona brought to mind an old cliché: If you can’t beat ‘em, join ‘em.
In this case it applies to Nokia, the once-mighty cellphone maker that soon will be part of Microsoft. Nokia just announced an Android phone.
Although Microsoft hasn’t yet taken the reigns of Nokia, it is expected to do so within months, so it’s highly unlikely that Nokia executives made this announcement without consulting their soon-to-be overlords.
And even if Nokia weren’t about to be a division of Microsoft, it would still be an extraordinary announcement because Nokia is the only major smartphone maker to have jumped on the Windows phone bandwagon in a big way. All of its recent smartphones, including its very well reviewed Lumia 1020 were running Microsoft’s Windows phone operating system long before the two companies announced they were getting married.
The initial line of Nokia Android phones — the Nokia X, X+ and XL — will be low-end devices aimed mostly at “emerging markets,” which is an industry euphemism for developing countries. Prices start at $122 without a carrier subsidy (the prices many Americans pay for phones are subsidized by carriers in exchange for being locked into a contract).
Like Amazon’s Kindle Fire tablets, which are also based on the Android operating system, the Nokia phones user interface won’t look like Android and users won’t download Android apps from the Google Play store, as do users of Android phones from LG, Sony, HTC and most other Android handset makers. Instead, Nokia is basing its new phones on the Android Open Source Project (AOSP), which enables it to use the core Android operating system without necessarily using the Google-inspired interface or accessing Google services such as the app store or the typically bundled Google apps and features such as Gmail, Google Maps, Google search or Google storage options.
The new phones will run what Nokia is calling the “New Nokia X software platform,” which is basically its own user interface running on top of Android combined with its own app store.
Nokia has already issued a news release that “welcomes Android developers.” It claims that “the vast majority of Android apps can be published to the Nokia Store as is.” For those that can’t, the company will offer tools to make the transition easier.
From Microsoft’s standpoint, what’s most important is the applications and services that run on the phones, not who wrote the underlying code. As he introduced the new phones from Barcelona, Nokia’s former CEO and soon-to-be Microsoft Xbox chief, Stephen Elop, made it very clear these phones will be “introducing new customers around the world to popular Microsoft services like Skype. Microsoft OneDrive, Outlook.com and more to come.”
This could be a brilliant move. Even though Microsoft’s Windows Phone operating system has been well received in certain markets, its third quarter 2013 global market share is only 4 percent, putting it in next to last place, just ahead of BlackBerry, whose share has shrunk to 2 percent. That compares to an 82-percent share for Android and a 12 percent share for Apple’s iOS, according to Gartner as reported by The Wall Street Journal.
This move fits in with Microsoft’s strategy to evolve into a “devices and services company,” as articulated by its recently retired CEO, Steve Ballmer. The company has made the bulk of its money selling software to corporations and end-users, and operating system licenses to PC makers. But with a shrinking PC market and a change in the software landscape, Microsoft is looking to “primarily monetize our high-value activities by leading with devices and enterprise services,” as Ballmer wrote in his final letter to shareholders.
Microsoft isn’t exactly copying its competitors, Apple and Google, but it is learning from them. Apple, for the most part, gives away its software and makes its money from devices. Even though the press likes to marvel at the latest hardware specs when Apple comes up with a new iPhone, iPad or Macintosh, the real value in these devices isn’t the hardware — lots of companies can build good hardware — but the software that you can get only by buying their hardware. And even though Google makes some hardware, the bulk of its revenue is the advertising revenue it earns from services that are accessible through the hardware that runs its operating systems, applications and services. Google makes money when people use their services on any phone, tablet or PC, but they do even better when people use Android or Chromebooks because the services are more tightly integrated into those devices.
Right now, these Android-based Nokia phones are aimed at the developing world, but it wouldn’t surprise me if they become part of Microsoft’s mainstream strategy as the 39-year-old company adapts itself to the new world of devices and services.