Should Nokia Have Gone With Android?

By now, most people are aware of the Keystone Kops routine played out during Nokia's (NYSE: NOK  ) launch last week of its flagship smartphone, the LTE-capable Lumia 900, on the AT&T (NYSE: T  ) wireless network:

  • Poor planning: Scheduling the Lumia 900 coming-out party on Easter Sunday -- Easter Sunday!!!! -- guaranteed a smaller-than-optimal turnout.
  • Poor product testing: After accusing other smartphone makers of foisting unproven handsets onto unwitting customers, a "software glitch" rendered Nokia's Internet-capable phone incapable of connecting with the Internet. Not only was this embarrassing; it was also expensive. Nokia offered the phones for free to anyone buying one before April 22 -- even if the phone was problem-free.
  • Poor financial news: Nokia released an earnings warning three days after the Lumia's debut that the company's first-quarter outlook looked grim. Its bread-and-butter feature-phone business in India, the Middle East, Africa, and China was being encroached upon by cheaper smartphones running Android.

Woulda, shoulda, coulda ...
Could Nokia have avoided all those troubles by choosing a different OS to go with, after the company found its homegrown Symbian platform to be wanting as a smartphone operating system? Rather than Google's (Nasdaq: GOOG  ) established and popular Android OS, Nokia chose Microsoft's (Nasdaq: MSFT) thinly used Windows Phone mobile OS as its smartphone platform.

Should it have gone with Android? After all, smartphones made by Samsung, LG, Huawei, and Motorola that run the Android OS together have grabbed more than half of the world's smartphone OS market share by the end of 2011, according to market research firm Gartner. Apple's (Nasdaq: AAPL  ) iOS, running iPhones, was in second place with 23.8%. Windows Phone was in sixth place. Worse yet, rumors abound that the Cuprtino powerhouse will launch another iteration of its iPhone at some point in the second half of the year.

So why Windows Phone?
As for why Nokia chose to go with the mobile OS that it did, we have to go back to February 2011 and listen in on a joint Nokia-Microsoft press conference, where Nokia CEO Stephen Elop announced the companies' cooperative venture to the world.

Why Windows Phone? "It gives us the opportunity to lead," Elop said. "It gives us a faster path to the United States marketplace."

Elop then said that Nokia assessed three options: MeeGo (a Linux-based open-source OS, now unsupported) along with its own Symbian OS, Android, and Microsoft.

"We absolutely spent time with our colleagues at Google," he said. Even though Elop admitted that Android is "moving very quickly" and "gaining share," he was concerned that the Nokia handsets would become just another Android-running phone. "Our fundamental belief is we would have difficulty differentiating," he said. "The commoditization risk was very high."

Earlier, though, in an interview with All Things D's Ina Fried, Elop admitted that Android was ahead of Windows Phone: "Android is growing very nicely; it has significant market share." He also said that "Nokia could bring to the Android ecosystem [a] very large number and would signal a very substantial shift in the dynamics of the mobile operating system market."

As for the Microsoft product: "Windows Phone is in its early formative states in terms of customer traction and so forth."

The line at the bottom
So it appears that the choice of Nokia's smartphone operating system may have been made not because of any technical advantage -- or even market-share advantage -- that the Windows Phone OS may have had over Android, but because the Finnish phone maker was just afraid of having its product become another undifferentiated Android-running mobile device in a vast sea of the same.

But Elop made those remarks more than a year ago, and the dynamics of the mobile marketplace have gone through some changes. Apple has been able to charge mobile carriers so heavily for its very popular iPhone that subsidies the carriers have to pay on the iPhone to lure customers into long-term contracts cut deeply into their profit margins.

So putting Nokia's recent marketing missteps aside, having a viable third mobile ecosystem around to put competitive pressure on Apple and the Android phone makers to keep their costs down could be incentive enough for the carriers to help Nokia get through its recent woes -- maybe even long enough so that people will stop asking the obvious question.

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Fool contributor Dan Radovsky owns shares of AT&T and Nokia. The Motley Fool owns shares of Microsoft, Intel, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Nokia, Google, Intel, and Microsoft and creating bull call spread positions in Apple and Microsoft. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (5) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 17, 2012, at 7:38 PM, bsimpsen wrote:

    Except it appears that European carriers are NOT jumping in to help Nokia.

  • Report this Comment On April 17, 2012, at 8:04 PM, XMFDRadovsky wrote:

    bsimpsen,

    Yes, it appears so. I should have clarified my last paragraph by saying U.S. wireless carriers.

    Thanks for reading,

    Dan

  • Report this Comment On April 17, 2012, at 9:10 PM, deemery wrote:

    Why Windows Phone? Because it's pretty clear Nokia sold its soul to Microsoft. The question is whether Nokia made that decision, or Microsoft made them the offer they couldn't refuse.

    Either way, if you hire an ex Microsoft employee as your "rescue CEO", going with Microsoft is hardly a surprise.

  • Report this Comment On April 17, 2012, at 11:55 PM, funspirit wrote:

    I heard that Nokia's CEO was like the Manchurian Candidate for Microsoft, and alleviated the need to buy the company.

    It is pretty much do or die for Nokia at this point.

    With google buying Motorola, they might actually help push OEM's towards Microsoft-- a little about that here

    http://www.richmakesyourich.com/2012/04/challenge-of-digesti...

    Good column by the way Dan! thanks.

  • Report this Comment On April 18, 2012, at 7:25 PM, italianceltic wrote:

    Maybe Nokia chose Microsoft for that very reason? Who cares. The Lumia 900 Window's phone blows away Android which is a copy of the iPhone. The only negative I have heard from 1 colleague who actually loves the Lumia 900 phone, was that the maps look better on his iPhone. I said really? The Lumia has a better graphical display. He then said, oh I mean the map looks like a map on the Lumia and he doesn't like the gyroscopic functionality. Whatever.

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