The Timing of Nokia Android Phones Is All Wrong

If you've followed the Nokia (NYSE: NOK  ) and Microsoft (NASDAQ: MSFT  ) $7.2 billion devices and services acquisition saga, the recent Android OS phone announcement at the Mobile World Conference (MWC) didn't come as a surprise. There have been rumors circulating for months, and most of us were just waiting until this year's MWC in Barcelona to hear the inevitable: Nokia partnered with Google's (NASDAQ: GOOGL  ) Android for its latest line of smartphones.

The notion's a sound one: With Google and Apple dominating smartphone market share domestically, emerging markets offer a ton of upside for low-cost devices, and that's exactly where the new Android OS Nokia X, X+, and XL fit, as per Nokia's press release introducing the new handsets. Sounds good, right? Except that Microsoft's acquisition of Nokia's phone division is only a few weeks away, barring any last-minute surprises, and it appears not all Softy execs are enamored with a phone sporting an OS from, "those guys" in Mountain View.

The issue
The timing of the new Android phones raises some questions. Granted, until the devices and services deal goes through, Nokia can run its unit as it sees fit. But, should it? As the acquisition near fruition, you'd think there would be some give-and-take between both parties, particularly when significant decisions are made by Nokia that will only impact Microsoft.

It would seem that an introduction of a new smartphone lineup, especially when it includes using an OS from Google, would have the blessing of Microsoft execs when so much is at stake. But Microsoft VP of Windows Phone division Joe Belifore's statement at MWC, not to mention a quote attributed to the infamous "unnamed source," suggests the Nokia X line didn't sit well Microsoft.

While Belifore said the relationship was good, he went on to add that Nokia does, "some things that we may be less excited about." Like a smartphone running Android? Another, albeit unnamed, Microsoft insider was less PC, he or she simply called the new Nokia phones "embarrassing."

Adding insult to injury
Already, Microsoft is killing it in emerging markets, growing a whopping 148% in Latin America and over five times that in the Middle East and Africa, all markets the new Nokia X line with Android are targeting. But teaming up with Google now, even though the new Nokia smartphones have a "forked" OS to make it look and feel like a Windows Phone, seems especially odd considering a couple of additional announcements Microsoft made at MWC.

Microsoft will partner with nine new device makers – due in large part to its on-going success in emerging markets – which should add fuel to the fire Windows Phone is already generating outside North America. Included in the nine are the fourth and fifth largest smartphone manufacturers in the world: LG and China's Lenovo. With its recent acquisition of Motorola , you can bet Lenovo will continue moving up the smartphone food chain, taking Windows Phone along for the ride.

But the real zinger at MWC was the unveiling of Microsoft's updated Windows Phone 8.1, which is chock-full of new features specifically designed to better integrate with low-end smartphones. Microsoft also shared its plans to lower the cost of Windows to OEM's (original equipment manufacturers) across the board in an effort to generate worldwide volume, just as its doing with Windows Phone.

Final Foolish thoughts
The smartphone growth potential outside the U.S. is tremendous, and Microsoft has already begun making serious inroads. Now, it has positioned itself even better with the new vendor partnerships and Windows Phone 8.1, adding to its emerging market successes. So, why does it need Android again?

Whether needed or not, the Android cat is out of the bag, so it's unlikely Microsoft will go on record voicing its displeasure, if indeed there is any. But it won't be long before we find out. With the closing of the devices and services deal nearing completion, the decision to continue offering Android phones will soon be in Microsoft's hands, not Nokia's.

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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 February 25, 2014, at 11:33 PM, rh33 wrote:

    Although I haven't followed either Microsoft or Nokia closely lately, I am willing to venture a guess that this article is just wrong. I can't believe that Nokia leadership would be careless enough to do this without Microsoft's blessing. Stephen Elop still works for Microsoft and I imagine he still has some Microsoft phone numbers in his pocket. The Finns are quite hard-headed, but I don't think they are that obtuse. And they are usually pretty careful about what is good for them. Furthermore, if I were Microsoft, I think I would want more than one arrow in my quiver with which to do battle. They are, if the deal goes through, going to own an immense number of phone models. Some Android phones will fit well into their inventory. There are probably parts of the world where, in the short range particularly, it will be easier to compete using Androids than 8's.

  • Report this Comment On February 25, 2014, at 11:43 PM, lee654 wrote:

    You are Wrong !

  • Report this Comment On February 26, 2014, at 1:08 AM, garifolle wrote:

    Anyway, this article only wants to promote the super stock that The Fool wants you to buy, and for this you need to pay a lot.

    Nokia now is much more about other things then phones, and if they still can do some, it's OK. Because the biggest mistake was on the part of Microsoft to make this expensive acquisition.

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