Suddenly, Android Is Key to the Future of Microsoft Stock

Rather than relying on Windows Phone, Nokia's X2 runs a version of Android. Credit: Nokia.

Just as Google is preparing to tell the world about its newest geekery at its I/O developer conference in San Francisco, Microsoft (NASDAQ: MSFT  ) is making a bigger bet on Android. Oh, irony. You never disappoint, do you?

Meet the X2
Nokia's devices team, which officially joined Microsoft in April, pitches the new X2 smartphone as blending the best of Android "apps" with built-in Windows "experiences," such as Skype, OneNote, and Outlook. Mix in dual SIM slots for adding storage, a 4.3-inch display, and a 5-megapixel camera, and you've a decent (if unspectacular) mid-range phone.

That seems to be exactly the way Microsoft wants it. Nokia hasn't yet brought the X2 to U.S. shores, choosing instead to focus on the Windows Phone-based Lumia line. There's good reason for that. Despite its relatively meager market share, IDC expects shipments of Windows Phone handsets to grow 29.5% annually through 2018. Average selling prices also remain above that of Android alternatives.

An affair to remember
So why add more Android to the mix? The Nokia brand matters in emerging markets ,where selling prices are lower by design. Having a mid-range Android handset could help Microsoft to be competitive in territories where Apple (NASDAQ: AAPL  ) is either weak or nonexistent.

India is a good example. Apple has spent years trying, and largely failing, to win iPhone converts on the subcontinent. Premium pricing has killed demand, leaving everyday consumers to seek alternatives. (Google's OS accounts for 91% of handsets in use in India, versus 5.4% for second-place Windows Phone, researcher IDC reports.)

Meanwhile, earlier this month, ZDNet's Mary Jo Foley reported that Mr. Softy is pushing back the release date of the touch version of Office for Windows 8 to give space for an Android version to reach market. Introducing an Android-powered tablet to take advantage strikes me as the next logical step.

Will it happen? Not soon, I'd wager. Yet every step Satya Nadella and his team take to reduce the company's overall dependence on Windows -- while painful in the short term -- is probably good for Microsoft stock over the long term.

Now it's your turn to weigh in. What do you think of the Nokia X2? Would you buy, sell, or short Microsoft stock at current prices? Leave your take in the comments box below.

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  • Report this Comment On June 25, 2014, at 10:54 AM, Drichter wrote:

    That's not irony. It's a strategic play to get more people comfortable with Microsoft's ecosystem.

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