28 Comments

Summary:

While Nokia’s CEO Stephen Elop set tongues wagging with talk that it is open to “build or join a competitive ecosystem,” which suggests that it is looking at Android or Windows Phone 7, I think it’s still too early for Nokia to look to another OS.

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Nokia’s CEO Stephen Elop has set tongues wagging with talk that Nokia must “build, catalyze or join a competitive ecosystem,” which suggests it’s poised to look at Android or Windows Phone 7, perhaps to up its game in North America. Analysts and observers have been weighing in, saying a move is now more likely than ever. But I think it’s still too early for Nokia to look to another OS, which would be a major admission of defeat and may not provide the momentum to make it worthwhile.

Nokia clearly has its work cut out for it. The company shipped 28.3 million smartphones during the fourth quarter of 2010, up from 20.8 million during the same period last year. But Nokia’s share of the smartphone market has slipped to 31 percent in the fourth quarter, compared to 40 percent from a year earlier.

Elop said in an earnings call, “The game has changed from a battle of devices to a war of ecosystems,” and added later that “Our industry has changed and we have to change faster.” He then later talked of joining or building a competitive eco-system, something Nokia could pull off with its strong brand and relationship with carriers. Elop said he will layout a new plan for Nokia’s strategy next month.

So the discussion is now turning to Nokia aligning itself with Android or perhaps Windows Phone 7. A partnership with Microsoft has gotten a lot of talk lately after a report last month that the two companies were discussing having Windows Phone 7 run on Nokia devices. The fact that Elop came from Microsoft has also stoked speculation. Others are suggesting Nokia is going to look at Android, despite the words of former executive VP and head of Mobile Solutions Anssi Vanjoki, who compared using Android to a boy peeing in his pants for warmth.

It’s clear that Nokia is need of help, but I’m just not convinced that Windows Phone 7 or Android is the answer, not at this point at least. If things keep going down and Nokia can’t get its act together this year, I reserve the right to change my mind. But here’s why both options don’t work for me:

Windows Phone 7 is still a very new OS, and early shipment figures have not indicated how well it’s actually being adopted by end users. There are still some rough edges being smoothed out as well, like fixing the lack of cut-and-paste and multitasking support. WP7 does have a decent-sized application market, but larger developer support will lag as developers sort out how much traction the platform has. To pin Nokia’s smartphone strategy to WP7, even if it’s just for North America, doesn’t guarantee a major reversal in fortunes.

Meanwhile, Android is also not a great fit. There is so much competition among manufacturers that it’s going to be hard for Nokia to stand out. Yes, Nokia has some of the best hardware around, but HTC, Motorola , Samsung and others are putting out top-notch Android devices. Nokia becomes just another Android vendor and will have to compete against not only the big boys, but a host of cheap Asian manufacturers looking to churn on low-cost Android devices.

The larger issue is that Nokia will lose out on the opportunity of creating an integrated hardware and software experience, something Apple has benefited from. There’s a lot to be gained by owning the experience and making it extremely polished and usable. Just because Nokia hasn’t executed on this as well as Apple doesn’t mean it should give up yet. Look at Research in Motion. It’s getting good first impressions of the PlayBook tablet, which is using a new QNX-based operating system, which will eventually become the main platform for all RIM devices. Though some suggested RIM would be better adopting Android, I think it’s got a brighter future with QNX. Now, it’s unclear how RIM will ultimately do and the same goes for Nokia, but I think it’s smart to try and go with your own OS rather than ceding control to someone else. And also, Nokia’s value is not only in hardware but owning the service layers on top of that. If Nokia can get its services and apps story together, it can extract more value and profitability. Adopting another platform limits or kills that opportunity.

The fact is, Nokia has a plan and though its pretty late in coming, it should try to execute that before it looks elsewhere. High-end devices running MeeGo are set to appear later this year, while Symbian will serve mid-range smartphones. Both will be tied together in the QT software development framework that will allow developers to write applications once for both platforms. Going with another platform will only confuse developers who are being courted to QT right now. Nokia should see its strategy through first and try as hard as it can to get it done in-house. The smartphone game, despite its massive growth, is still in its early days. We’re going to be talking about smartphones for some time to come.

So Nokia, while it’s been painfully slow in keeping up, should not chase after another OS just yet. It’s been working hard to get its act together, and this year will be telling to see if it’s on to something. Nokia should have the courage to see all that work through. Now if by the end of the year, Nokia has gone nowhere with its plans, then all bets are off. But until then, I think Nokia should consider all its options but hold off for now.

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  1. Nokia’s worldwide brand is supposedly higher than Apple or Google. They want to add value not diminish it. If they can get Qt to do all the things they need it to do then they are definitely on the right track. Qt Quick and QML makes application porting and design much easier and faster so they’ll be able to get more apps much faster. If they can’t get that together then I have little confidence they can get Android phones together either. They control the advances to their mobile OS but if they adopt someone else’s OS they lose that control and either they won’t be able to keep up with the competition as they use the latest code or the things they want to do hardware wise might not be supported in the OS and they will be just another Android vendor.

  2. Who wants another Android phone.
    I want something different to Apple, at
    This rate, there will be just two options. What about
    The competition commission.

    Stay true Nokia. To your fans.

    1. It’s true. Windows and Android are anti-competitive. They destroy the industries they are in.

  3. Lucian Armasu Friday, January 28, 2011

    Elop is right, though. It’s all about the ecosystems now. Even if you build a truly great OS, the ecosystem factor is just too big and matters much more than having a different OS – just look at WP7 and what being late to the market meant for its success.

    The longer Nokia waits in getting accustomed with Android, the harder it will be for them to join Android later on, because they won’t have the expertize their competitors have from making Android phones for years (by the time Nokia adopts it).

    Let’s make one thing clear. Nokia alone won’t be able to build an ecosystem that will match Android’s ecosystem. Just think about how many models they’ll have to build every year just to stand their ground against the plethora of Android phones. If 3 important manufacturers like Samsung, LG and HTC can’t get a lot of sales from WP7 or build a very strong ecosystem, how will Nokia alone manage?

    They’ll have to encourage the other manufacturers to use Meego, too. And I do hope they will do that, but I think they won’t for the very same reason they weren’t willing to adopt Android early on. They want full control of the platform, and they also want to be differentiated from others with the OS, which I don’t think offers as much value as they think, if the phones don’t sell well because of the lack of a strong ecosystem behind it.

    If Nokia convinces Samsung, LG, HTC, SE and even Motorola that their alternative to Android should be Meego (and not WP7) then, and only then, Meego will have a chance to build an ecosystem at least half as big as Android, and the the media attention it needs to continue growing and sell their phones.

    Remember this is the same way Android “won” against iPhone. If it would’ve been an OS used by only one company, it would’ve never gotten close to iOS’s share of the market.

    1. Great points. This is the challenge for Nokia to get an ecosystem going. But I don’t think it has to be an iOS/Android world. Nokia will have to execute like crazy but I’m just saying it’s not too late for them. Let’s see how QT works. We’ll find out soon enough though when Elop tells all next month.

    2. “Nokia alone won’t be able to build an ecosystem that will match Android’s ecosystem. Just think about how many models they’ll have to build every year just to stand their ground against the plethora of Android phones. ”

      The point is, Nokia has far too many models right now. With new Symbian and MeeGo both adapting to Qt they are however better off maintaining a variety of handsets than before.

      I think Nokia is on the right track and they will prove it this year. Nokia’s ecosystem is already very promising: 4 million apps downloads a day. MeeGo is spreading among manufacturers outside phone business. In Barcelona there will be MeeGo tablets (I’ve seen one from Germany). Car manufacturers are working on it.

    3. Different phone models are not an ecosystem. Apps and content delivery and cloud services and accessories and retail stores and in-person support and loyal customers are an ecosystem.

      We have full-face touch screens now. Every one of Apple’s 400,000 apps turns the iPhone into a different model of phone. Every case dramatically alters its appearance. There is much more variety in just the iPhone 4 than all phones Nokia ever made in it’s entire history. Today, the buttons and displays change app to app, not model to model.

      Every iPhone also has a very different set of apps, because the users choose them, not carriers. Tremendous variety.

      There is no money in Android for handset makers. Motorola made no money from Verizon Droid. All the Android makers combined make less than 20% of what Nokia makes right now in profit. Motorola and Sony Ericsson are on a deathwatch. Even if Nokia really loved Android, waiting a year will mean less competition, not more, because a couple of the current Android makers will go out of business. As bad as you may think Nokia is doing, the Android handset makers are doing worse, except possibly Samsung. The money in Android is for advertisers and carriers, not handset makers, who are interchangeable commodities.

  4. I don’t think Nokia is going to pay for a OS; they would have to do with WP7. Think on Motorola; they where close to dead 2Years ago; with their own OS and WP6+6.5. They say Nokia makes the best Hardware; put the free OS (plain Android like Nexus) on it make some money; would be cheap to do! Keep the level of market share; and still continue developing with MeeGo!

  5. I agree with Horace Dediu:
    http://www.asymco.com/2011/01/28/stephen-elops-ecosystem-messages/

    Elop was formerly a MS VP, and seemed to be a CEO pick out of the blue for the cell phone giant.

    I would really doubt he’d have been chosen if the decision hadn’t been made to go with MSFT already.

    Nokia will keep building phones for emerging market on Symbian, and go with WP7 for established western markets.

    Meego? Tablets.

    1. The MSFT connections makes a lot of sense too. I’m just saying it doesn’t have to happen this instant. But Nokia could have other thoughts…

  6. Johnny Tremaine Friday, January 28, 2011

    I think many would agree that they have until about this time next year to make Meego a success, assuming it’ll even be ready to ship.

    If they’re still bleeding profits and share in a year, then Nokia is toast.

  7. Microsoft? That’s a sick joke. The folks in Redmond have shown zero competence in selling to today’s smartphone buyers, not just in software design but in hardware & marketing, as well. And they are the only major player in mobile that’s shown even less ability to meet product-deadlines than Nokia, itself. Talk about the blind leading the blind.

    If Nokia goes with WP7, it’s game over…they have no more rabbits in the hat to distract Wall Street. Even in an exploding market Nokia keeps losing share, selling phones that have little margin left to squeeze. And they sure can’t keep buying companies just to dangle them in development hell (Trolltech) or give the product away (Navigon).

    With Android, maybe they could gain some momentum by porting it onto an existing top-line model (N8, E7, etc.). Android hardware is a niche they can win, easily. Otherwise, lotsa luck competing with ZTE, pushing BOGO candybar phones to the Asian markets. With MS on their side, MS makes a few bucks, but NOK will be a penny stock by mid-2012.

  8. Hi Ryan,

    As you mentioned Elop stated that Nokia should “build, catalyze or join a competitive ecosystem” everyone seems to think this means Nokia is looking to use someone else’s OS but what if they’re actually trying to get QT used by RIM or HP. That would be a great way to build a competitive ecosystem for all three companies.

    It would allow each company to offer unique devices running tightly integrated hardware and software while at the same time provide a huge install base to entice developers to build QT software that could run on any of them.

  9. Nokia needs a MeeGo ecosystem with multiple vendors to survive. But the question is really whether Nokia is willing to give up the degree of control they have over MeeGo today. Much like Symbian, I don’t see that happening any time soon. In fact, until Nokia launches their first MeeGo handset, they are pretty much internalizing all of their development. That means there is no effort to build an ecosystem yet as they are no doubt rapidly tinkering with their MeeGo needs. I am skeptical of Nokia’s ability to do both well without more vendors.

    1. MeeGo is an open source project overseen by the Linux Foundation. Qt is also open source.

      Apart from this weeks closure of the Qt Components MeeGo source for competitive reasons, presumably as they don’t want to announce the UI look before MWC, Nokia couldn’t be MORE open about the development of MeeGo.

  10. Where’s that Nokia guy who said using Android is like a boy peeing in his pants to stay warm? Nokia could have joined the Microsoft WinPhone 7 under his regime. And while Elsop’s connection to Microsoft certainly creates a natural bridge to Microsoft, WinPhone 7 has yet to impress buyers. And beyond that, getting into bed with Microsoft only insures improvement for Microsoft. A Nokia exclusive makes Phone 7 a success, who holds the licensing? Who wants to be an Android OEM clone, anyone who can’t build the ecosystem to compete with Apple. Android gives OEMs’ the mechanism to join an ecosystem that has traction. That they can customize to differentiate themselves. That they can scale to different markets. Android seems like the perfect match for Nokia.

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