Nokia admits it rejected Android; eyes "billions" in revenue from WP7 deal(mobilebusinessbriefing.com)
mobilebusinessbriefing.com
Nokia admits it rejected Android; eyes "billions" in revenue from WP7 deal
http://www.mobilebusinessbriefing.com/article/nokia-admits-it-rejected-android
10 comments
I think the Nokia decision was the right one for Nokia, but the given reasons are BS.
Basically Nokia could have ended the smartphone war by joining with Android. But ironically, that makes them more valuable to Microsoft. This is just the same as Microsoft paying people to build apps for WP7, paying Verizon to use Bing, or paying devs not to release games on PS3 but on a massive, multi-billion dollar scale. It's a bit tragic when the greatest value your company can offer is to be paid to not join the dominant ecosystem in exchange for a cut of a desperate monopolist's war chest, but that's why you need to bring outsiders with no emotional attachment to your products in to do it.
So basically he wanted to "create a challenger" because Microsoft would pay them handsomely to do so. And if it doesn't work out, it's not like Android is going anywhere, so they've got a Plan B. (Though to be honest I think they're currently splitting the company into two pieces, the bit that will wring any remaining revenue from Symbian then close, and the bit that Microsoft will buy once they've sacked anyone Microsoft doesn't need. Microsoft will then try the PlaysForSure -> Zune thing again.)
Basically Nokia could have ended the smartphone war by joining with Android. But ironically, that makes them more valuable to Microsoft. This is just the same as Microsoft paying people to build apps for WP7, paying Verizon to use Bing, or paying devs not to release games on PS3 but on a massive, multi-billion dollar scale. It's a bit tragic when the greatest value your company can offer is to be paid to not join the dominant ecosystem in exchange for a cut of a desperate monopolist's war chest, but that's why you need to bring outsiders with no emotional attachment to your products in to do it.
So basically he wanted to "create a challenger" because Microsoft would pay them handsomely to do so. And if it doesn't work out, it's not like Android is going anywhere, so they've got a Plan B. (Though to be honest I think they're currently splitting the company into two pieces, the bit that will wring any remaining revenue from Symbian then close, and the bit that Microsoft will buy once they've sacked anyone Microsoft doesn't need. Microsoft will then try the PlaysForSure -> Zune thing again.)
that makes them more valuable to Microsoft ... because Microsoft would pay them handsomely to do so
So why did Nokia not get a better deal from Microsoft? The drop in Nokia's shares wasn't because they went for WP7, it's because they didn't get any kind of exclusivity deal.
So why did Nokia not get a better deal from Microsoft? The drop in Nokia's shares wasn't because they went for WP7, it's because they didn't get any kind of exclusivity deal.
I'm not really sure we know what kind of deal they got; a lot depends on how those "billions of dollars" of payments are structured.
For instance, the maps licensing deal: does this mean that Nokia will be getting royalties (for the mapping software) on sales of other manufacturers' handsets? If so, they haven't got an exclusive, but they do have a favored position.
EDIT: if it's just advertising services, on the other hand, which is all Elop explicitly mentioned, then this does look pretty raw.
For instance, the maps licensing deal: does this mean that Nokia will be getting royalties (for the mapping software) on sales of other manufacturers' handsets? If so, they haven't got an exclusive, but they do have a favored position.
EDIT: if it's just advertising services, on the other hand, which is all Elop explicitly mentioned, then this does look pretty raw.
About details: agreed. But you'd think Nokia would say something concrete about how great the deal is, given their shareholder's mood at the moment. What's the plan? Use the billions to make a surprise dividend?
Maps is the kind of thing analysts were looking at. But I understood the deal as saying that MS would have a special search interface for Nokia users that integrated with Maps, not that WP7 would syndicate the service. That would be in the category of "less that complete surrender over UI".
Maps is the kind of thing analysts were looking at. But I understood the deal as saying that MS would have a special search interface for Nokia users that integrated with Maps, not that WP7 would syndicate the service. That would be in the category of "less that complete surrender over UI".
Desperate monopolist? They have 5% market share on mobile.
Gosh you mean all those lawsuits did not work?
Nokia has shown it was incapable of creating a challenger as it resorted to lawsuits rather than change. Without MS firing middle management will not happen with MS paying Nokia either. Its Siemens Handset biz replayed out again.
Nokia has shown it was incapable of creating a challenger as it resorted to lawsuits rather than change. Without MS firing middle management will not happen with MS paying Nokia either. Its Siemens Handset biz replayed out again.
I think Nokia wants to be a major player in the WP7 ecosystem rather than a minor player in the Android ecosystem. In an Android/Apple 'duopoly' every hardware maker except Apple has basically the same OS/app offering and Nokia would be playing catch-up against established android offerings - that is very scary to Nokia. The alternative is to partner with Microsoft and aim to be a major player in a 'third way' ecosystem. Really this isn't about how many ecosystems, its about the size of Nokia's slice of the ecosystem they chose. So they're taking the risk that WP7 will become a viable platform over the risk that they'd be a bit player in an Android world.
I heard that a lot, but - I'm not sure that I agree. There are other manufacturers of WP7 handsets already. Nokia needs to set itself apart, and I have troubles understanding how.
WP7 phones have rather tight hardware requirements [1] that to a degree influence the general handset. I fail yet to see how Nokia can top that (Maybe coming up with a better Camera/Zeiss optic. Maybe putting quite a lot more power in the handset - but the first option would be more for a niche imo and the second would cut into margins if you want to be competitive).
Sure, it's all just speculation until we see their first devices. But at this point I remain unconvinced that Nokia can differ enough to dominate the WP7 platform.
1: http://en.wikipedia.org/wiki/Windows_Phone_7#Hardware
WP7 phones have rather tight hardware requirements [1] that to a degree influence the general handset. I fail yet to see how Nokia can top that (Maybe coming up with a better Camera/Zeiss optic. Maybe putting quite a lot more power in the handset - but the first option would be more for a niche imo and the second would cut into margins if you want to be competitive).
Sure, it's all just speculation until we see their first devices. But at this point I remain unconvinced that Nokia can differ enough to dominate the WP7 platform.
1: http://en.wikipedia.org/wiki/Windows_Phone_7#Hardware
Nokia are able to customise Windows Phone 7 when other OEMs can't, and will presumably be the preferred partner when developing new versions. This might seem minor, but it isn't: think of the root cause of HTC's Android marketshare.
There are plenty of other perks MS can offer Nokia too. Windows Phone 7 ads that prominently show Nokia phones being the most obvious. This is likely worth hundreds of millions of dollars in its own.
I suspect Nokia will continue MeeGo development in case the Windows deal fails, so they have an alternative platform to fall back on. The potential for Android-compatible MeeGo handsets being rolled out at a moment's notice should keep MS in check.
There are plenty of other perks MS can offer Nokia too. Windows Phone 7 ads that prominently show Nokia phones being the most obvious. This is likely worth hundreds of millions of dollars in its own.
I suspect Nokia will continue MeeGo development in case the Windows deal fails, so they have an alternative platform to fall back on. The potential for Android-compatible MeeGo handsets being rolled out at a moment's notice should keep MS in check.
Have you heard the expression "It's better to have a piece of a bigger pie, than to have a small pie"?
Nokia wouldn't be a minor player in the Android ecosystem. That's ridiculous. If they executed quickly and release some good Android phones within a year, they'd become relevant again. With their power, they could even beat Samsung, which is going to become the biggest Android phone manufacturer.
Of course they'd still need to compete well hardware wise. This decision seems to me like they need software differentiation because they know they can't compete well enough on hardware anymore.
By the time Nokia makes a few WP7 phones and sells them, Samsung will sell a lot more Android phones. I expect Samsung to become the #1 phone manufacturer within 2-3 years. This won't happen only because Samsung is growing, but because Nokia will sell a lot less Symbian units, due to competition in the mid and low end from Asian manufacturers.
Nokia wouldn't be a minor player in the Android ecosystem. That's ridiculous. If they executed quickly and release some good Android phones within a year, they'd become relevant again. With their power, they could even beat Samsung, which is going to become the biggest Android phone manufacturer.
Of course they'd still need to compete well hardware wise. This decision seems to me like they need software differentiation because they know they can't compete well enough on hardware anymore.
By the time Nokia makes a few WP7 phones and sells them, Samsung will sell a lot more Android phones. I expect Samsung to become the #1 phone manufacturer within 2-3 years. This won't happen only because Samsung is growing, but because Nokia will sell a lot less Symbian units, due to competition in the mid and low end from Asian manufacturers.
One problem with this logic: they're expected to ship in late 2011 at the earliest. By that time, other manufacturers will have had WP7 phones out for a year, which is a pretty long time in this space. They're late entrants to a crowded field either way.
Nokia would ideally like to have an iOS of its own, either proprietary to Nokia phones or offered to other manufacturers but controlled (to whatever extent) by Nokia. Failing that, it would at least like to be "suited" again the next time it chooses a smartphone OS in a few years. Throwing its weight behind Android would make Android the de-facto standard, and that would probably close off those possibilities. (Though Android can likely make it to de-facto standard status without Nokia's help.)
First a burning platform, now the challenger, this guy Elop really wants to go down in flames.
"Nokia was unable to give a firm timeframe on when its first WP7 phone would appear but it is hopeful for a launch before year end."
I find this very telling. As far as I can tell, Google made the first public announcement of the Open Handset Alliance in November 2007 and HTC released the first handset in October 2008.
Nokia and Microsoft who should both have more experience and resources specific to the mobile industry than HTC and Google did in 2007 are "hopeful" to even meet this timescale, let alone beat it.
In a year, Nokia will have even further to catch up. I'll admit I may be underestimating the difficulty of getting a new device to market, but it seems to indicate an aversion to risk-taking which may set Nokia even further back than they need to be.
I find this very telling. As far as I can tell, Google made the first public announcement of the Open Handset Alliance in November 2007 and HTC released the first handset in October 2008.
Nokia and Microsoft who should both have more experience and resources specific to the mobile industry than HTC and Google did in 2007 are "hopeful" to even meet this timescale, let alone beat it.
In a year, Nokia will have even further to catch up. I'll admit I may be underestimating the difficulty of getting a new device to market, but it seems to indicate an aversion to risk-taking which may set Nokia even further back than they need to be.
Agreed. By the end of the year (early next year), we're going to have Android devices with 2, 3 and maybe 4-cores, as well as a version of Android that no one could guess at right now (2.4, 2.5, 3.0, 3.1, 4.0 maybe?). Apple is going to be the same way. I can't imagine Apple not announcing new iPhone(s) and a new iPad this year in order to compete, so anyone who isn't rocking new hardware by the end of the year is going to get left behind. I'm looking specifically at Nokia and RIM, whose current phones are so outdated that it'd be embarrassing NOT to release something spectacular this year.
RIM has already "leaked" most of their planned high-end phones for this year, and none of them look spectacular.
It's not entirely clear what Elop means by "value transfer". My initial reading was that Microsoft would just be writing a big fat cheque to Nokia in exchange for Nokia using WP7. It sounds like it's actually something slightly more subtle but I wonder what it will boil down to.
It means "we can cut staff and save billions"
I spent some time today looking at youtube videos of Nokia's Symbian OS, and also looking through the shopping catalog.
It just makes me reminisce the fact that Nokia makes good reliable phones. In contrast Hua Wei phones I saw don't have the same build quality.
The Nokia wall papers are tastefully selected, but the standard Nokia fonts are looking a bit tired. I mean even Motif was good looking in its days, but human nature demands that these be refreshed regularly.
Nokia would have done just as well selling Android or refreshing it's Symbian OS. Anyone care to explain what is wrong with Symbian?
I own an Android now, but I would have bought a Nokia android if it was available.
By the way, there is a long write up on what's wrong with Symbian and Nokia back in July 2010 by a Symbian-Guru.com editor as he decided to move to Android instead. http://www.symbian-guru.com/welcome/2010/07/symbian-guru-com...
It just makes me reminisce the fact that Nokia makes good reliable phones. In contrast Hua Wei phones I saw don't have the same build quality.
The Nokia wall papers are tastefully selected, but the standard Nokia fonts are looking a bit tired. I mean even Motif was good looking in its days, but human nature demands that these be refreshed regularly.
Nokia would have done just as well selling Android or refreshing it's Symbian OS. Anyone care to explain what is wrong with Symbian?
I own an Android now, but I would have bought a Nokia android if it was available.
By the way, there is a long write up on what's wrong with Symbian and Nokia back in July 2010 by a Symbian-Guru.com editor as he decided to move to Android instead. http://www.symbian-guru.com/welcome/2010/07/symbian-guru-com...
I totally would have bought a Nokia android. WTF is a 'Samsung' anyway? Opportunity missed, and now I would happily buy a samsung again.
Not sure about that. My significant other constantly complains about my phone, and I have to admit my Samsung Android phone is not rock solid. Yes, I'm running a 3rd party version of the OS, but the Samsung version was slow, buggy and two versions of Android behind. She switched from Android (ok, it was Samsung's first Android phone, and was pretty awful) to Nokia/Symbian and was very happy.
They did it out of the goodness of their hearts, because it is better for the world if there isn't a duopoly? Yeah right...
> to sell any personal shares he still owned in Microsoft as soon as he was allowed.
This is hilarious. The Nokia CEO inked a contract with his ex-employer MS that benefits MS hugely while still owning shares of MS. Um... what?!
If it smells like a duck, and walks like a duck, and quacks like a duck... oh, well.
This is hilarious. The Nokia CEO inked a contract with his ex-employer MS that benefits MS hugely while still owning shares of MS. Um... what?!
If it smells like a duck, and walks like a duck, and quacks like a duck... oh, well.
"he also talked up the significant “value transfer” in financial terms that would come Nokia’s way as a result of reduced operating expenses and new revenue streams such as access to Microsoft’s search and advertising capabilities."
Wouldn't these two "value transfers" have occurred with Google? Nokia's operating expenses might have been reduced even further if they'd gone with Android (free) instead of WP7 (which they are paying to use). Wouldn't Nokia have gained access to Google's search and advertising capabilities if they'd gone with Android?
I don't know if Google or Microsoft is better for Nokia, but this article doesn't make it sound like Elop had any convincing reasons for his decision. It sounds like Nokia agreed to give Microsoft money (WP7 fees), but they haven't actually agreed on anything concrete that Microsoft will give Nokia yet?
Wouldn't these two "value transfers" have occurred with Google? Nokia's operating expenses might have been reduced even further if they'd gone with Android (free) instead of WP7 (which they are paying to use). Wouldn't Nokia have gained access to Google's search and advertising capabilities if they'd gone with Android?
I don't know if Google or Microsoft is better for Nokia, but this article doesn't make it sound like Elop had any convincing reasons for his decision. It sounds like Nokia agreed to give Microsoft money (WP7 fees), but they haven't actually agreed on anything concrete that Microsoft will give Nokia yet?
> Nokia's operating expenses might have been reduced even further if they'd gone with Android (free) instead of WP7 (which they are paying to use).
MS fee is what? $10 per phone, probably less for Nokia? But, do anyone actually think that Android is free? Sure, it can be free if you're some cheap Chinese factory that just slaps the latest commit from Android repository on their handset, but key Google applications aren't open sourced, and to get them you need to make a deal with Google ("Google experience" apps, support, etc), which I doubt is free.
On top of that, if Nokia wants to differentiate itself from said Chinese manufacturer, they need to build some custom UI on top of stock Android (which probably everyone will hate, but that's the way of doing things in Android world). And to support that UI on couple of future Android releases in timely fashion for each handset, to avoid angry mob with obsolete phones mere months after the purchase (SonyEricsson, I'm looking at you). Developers time aren't free, and Nokia is notoriously bad at making software, just look at their Symbian record.
MS fee is what? $10 per phone, probably less for Nokia? But, do anyone actually think that Android is free? Sure, it can be free if you're some cheap Chinese factory that just slaps the latest commit from Android repository on their handset, but key Google applications aren't open sourced, and to get them you need to make a deal with Google ("Google experience" apps, support, etc), which I doubt is free.
On top of that, if Nokia wants to differentiate itself from said Chinese manufacturer, they need to build some custom UI on top of stock Android (which probably everyone will hate, but that's the way of doing things in Android world). And to support that UI on couple of future Android releases in timely fashion for each handset, to avoid angry mob with obsolete phones mere months after the purchase (SonyEricsson, I'm looking at you). Developers time aren't free, and Nokia is notoriously bad at making software, just look at their Symbian record.
Also, if some cheap Chinese manufacturer slaps the latest Android commit on their handset, Google makes money, because that phone is going to run Google searches and show Google ads.
Honestly, it was a brilliant move by both Microsoft and Nokia. Microsoft dropped to 3% of the global market share for smartphones and Nokia's 2/3 market share dominance was nearly cut in half http://blog.cedowin.com/2011/01/mobile-future-taking-market-.... Additionally, Android overtook the #1 sales spot in Q4 globally, (depending on who you get your numbers from).
Nokia could have gone with Android, but why? There are already Android phones. Why be another number? The key to success is not to do what everyone else is doing but to do something different and find your niche. Microsoft touts itself as the "business" solution. This partnership of high quality hardware and business-minded software will set Nokia/Microsoft apart.
Nokia could have gone with Android, but why? There are already Android phones. Why be another number? The key to success is not to do what everyone else is doing but to do something different and find your niche. Microsoft touts itself as the "business" solution. This partnership of high quality hardware and business-minded software will set Nokia/Microsoft apart.
Would you say the same thing to a PC manufacturer after Windows 95 came out? Like it or not, Android is already the "Windows" of the phone industry. Going with another OS, that ust happens to have the Windows name on it, but with a much smaller market and momentum, is a catastrophic mistake.
What if this is going to be true a few years from now and Nokia fails with WP7 because the Android ecosystem assimilates everything. Will they still be able to go to Android? They'll be destroyed by then, and it will be way too late too switch. At least by going Android now, they would have a fighting chance, and would just need to become a competitive company again, which they haven't been for a while, even in hardware. Yes, the N8 looked pretty good, and the camera was nice, but that's about it.
What if this is going to be true a few years from now and Nokia fails with WP7 because the Android ecosystem assimilates everything. Will they still be able to go to Android? They'll be destroyed by then, and it will be way too late too switch. At least by going Android now, they would have a fighting chance, and would just need to become a competitive company again, which they haven't been for a while, even in hardware. Yes, the N8 looked pretty good, and the camera was nice, but that's about it.
2 failing companies teaming up doesn't equal success in my book.
Nokia could have started making great hardware again like they used to. They could have put Android on it, and done what HTC does. Unfortunately they haven't made a good phone in a long while.
Nokia could have started making great hardware again like they used to. They could have put Android on it, and done what HTC does. Unfortunately they haven't made a good phone in a long while.
One issue with Android which seems to have escaped mentioned is Oracle's lawsuit over Dalvik and concerns about how vigorously Google will ultimately defend the suit given the role Dalvik plays in their revenue model. Two years ago, adopting Android would not have come with the baggage that it does today.
three viable ecosystems is better for consumers than two. it also forces more competition to be dev friendly since apps are a large part of each player's strategy.
I'm not entirely sure that 3 ecosystems will work out to the benefit of users. With just two platforms, there's a decent chance that top-selling apps will eventually be ported to both. But with 3 platforms, you'll see a lot more market fragmentation and picking of winners. Witness the Wii/XBox 360/PlayStation 3 mess.
And because Windows 7 Mobile allegedly runs a dodgy version IE 7, we can't make portable applications using HTML 5, either.
So we're really looking at something like 1985, when developers had to pick between DOS, the Apple IIe, the Mac, and the remnants of the 8-bit microcomputer market. In this market, the correct strategy was to support a single platform and hope that it won. Ironically, Microsoft ported Excel to a huge number of operating systems, and they were eaten alive by Lotus. They've never made the mistake of fragmenting their efforts again.
And because Windows 7 Mobile allegedly runs a dodgy version IE 7, we can't make portable applications using HTML 5, either.
So we're really looking at something like 1985, when developers had to pick between DOS, the Apple IIe, the Mac, and the remnants of the 8-bit microcomputer market. In this market, the correct strategy was to support a single platform and hope that it won. Ironically, Microsoft ported Excel to a huge number of operating systems, and they were eaten alive by Lotus. They've never made the mistake of fragmenting their efforts again.
I'm sorry I fail to see how the wii/360/ps3 situation is a mess. the market is big enough for three players, hell it's big enough for several more given that games are bigger than movies.
Agreed. I love choice, but fragmentation is definitely an issue.
On a sidenote: This "there are two, now with WP7 there are three contesters" is (by accident? intentionally?) completely ignoring HP/Web OS. So maybe we're talking "4 ecosystems" now, supporting your point even further.
On a sidenote: This "there are two, now with WP7 there are three contesters" is (by accident? intentionally?) completely ignoring HP/Web OS. So maybe we're talking "4 ecosystems" now, supporting your point even further.
Is even the Android ecosystem even viable? Or is it just "a platform we should also port to for completeness?"
It looks like he didn't explain why they wanted to create a "challenger".
imo having three dominant players is better than having two dominant players. However, it would have been great to get Elop's thoughts on what benefits Nokia would get from creating a "challenger" and why a "duopoly" was not good for Nokia.