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Is Microsoft Corporation Tapping Android for a New Lumia Phone?

The Lumia 1520, running Windows Phone. Source: Nokia.

Earlier this week CNET reported (based on information from the @evleaks website), that one of Microsoft's (NASDAQ: MSFT  ) forthcoming Lumia phones will run on Google's (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) Android OS. If true, the move would be a big shift for the Windows Phone maker, and huge admission that its mobile OS can't keep up.

Not the first, nor the last
There have been, of course, other Nokia phones running Android. Earlier this year the company debuted the Nokia X with Android, and subsequent Nokia-Android phones thereafter. But since Microsoft acquired Nokia, it was thought (not surprisingly) that the company would move away from any Android phones Nokia had, to focus exclusively on the Windows Phone OS. After all, the point of purchasing Nokia was, at least in large part, to get more Windows Phones into the hands of consumers.

Even aside from the big change it would be for Microsoft to sell Android phones is the fact that Lumia phones have long been the flagship lineup for the Windows Phone platform. Any shift away from that would seem as if Microsoft was starting to give up on its own smartphone operating system.

Why Android and why now
Though it's just a rumor right now, there could be several reasons why Microsoft would make such a move -- though I don't think the company should.

First would be the obvious fact of Android's dominance in the mobile space. In the first quarter of this year, Google's OS took 81% of worldwide smartphone OS market share, according to data from IDC.

The Nokia X2 Dual SIM, running Android. Source: Nokia.

Second is that Microsoft has been more willing to work across platforms lately. Microsoft's Office can now be downloaded to Apple's iPad, with both free and subscription versions. As Microsoft branches out, adding Android to more smartphone lineups could be part of that strategy.

But if an Android Lumia is actually in the pipeline, I think Microsoft may be looking to the OS because its year-over-year smartphone market share has dropped even lower than the paltry number it was already at. In Q1 2013, Microsoft's Windows Phone took 3.2% of the worldwide smartphone OS market share, but that number fell to just 2.7% in the first quarter of this year.

While market share shifts are normal, due in-part to product cycle launches, Microsoft's low numbers mean the company can't afford to go down much further. Separate data from Kantar Worldpanel shows that Windows Phone OS dropped from 4.7% market share in the U.S. in May 2013 to 3.8% in May 2014.

Considering the hefty price it just paid, Microsoft may feel pressure to ensure Nokia devices are selling, even if some of them aren't running its own OS. Long-term, I don't think this is a good idea. While moving more Nokia-branded devices could help bring in revenue right now, in the end it's going to hurt Microsoft's ability to build a strong Windows Phone platform. If developers see Microsoft pushing Android devices, there's no reason why they'd want to make apps for Windows phones, which is a problem the company is already facing. I think investors should see a rumored Android Lumia phone for exactly what it is, a short-term solution to a long-term problem.

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  • Report this Comment On July 08, 2014, at 4:33 PM, neonspark wrote:

    MSFT bought nokia which had the nokia X. They paid millions for the brand lumia so it will just keep that name now which makes total sense.

    there is no huge change going on here. Although MSFT could easily pull an amazon and run with android to the horror of google, android is just a badly written set of device drivers and it would be easier for them to simply run its apps similar to how OSX runs windows apps or blackberry ran android apps.

    also please follow MSFT's communications chief

    in his words, this is just a crazy rumor.

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Chris Neiger

Chris has covered Tech and Telecom companies for The Motley Fool since 2012. Follow him on Twitter for the latest tech stock coverage.

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