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The Timing of Nokia Android Phones Is All Wrong

By Tim Brugger – Feb 25, 2014 at 10:15PM

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The notion's a good one: targeting the emerging smartphone market with the world's most popular OS. But the Finnish manufacturer's decision raises serious questions.

If you've followed the Nokia (NOK 1.42%) and Microsoft (MSFT -0.18%) $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 (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.


Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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