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Nokia CEO Stephen Elop
"I'm gonna make him an offer he can't refuse."

Nokia ruffled more than a few feathers when it announced that it would be shacking up with Microsoft when it comes to smartphone operating systems. Feeling the heat from smartphone operating systems like Apple's iOS and Google's Android, Nokia is winding down its efforts with MeeGo and Symbian in order to embrace the nascent Windows Phone 7 (WP7) operating system.

Now, a new report from BusinessWeek suggests that Nokia was offered a sweet deal to go with Microsoft’s WP7 operating system over the rival Android OS. BusinessWeek says that Nokia will receive roughly $1B as a part of a 5-year deal with Microsoft.

Microsoft, of course, will also profit handsomely from its $1B investment if Nokia's WP7 offerings take off in the marketplace. Unlike with Google's freely available Android OS, Nokia will pay Microsoft a royalty fee for each WP7 handset that it sells.

“This gives Microsoft scale and allows Nokia to rip out costs,” said Colin Gillis, an analyst at BGC Partners in New York, who recommends buying Microsoft shares. “Microsoft is getting the platform boost.” 

Although $1B USD is a nice motivator to adopt WP7, Nokia's Stephen Elop claims that Nokia would have gotten lost in vast sea of me-too Android devices, and that the Microsoft partnership gives it a chance to shine. “A decision to go with Windows Phone creates a very different dynamic. Windows Phone is a challenger. It becomes a three-horse race,” said Elop according to Mobile Beat.

Nokia’s Symbian operating system has been under a constant assault from Android. Android overtook Symbian as the world’s best-selling smartphone operating system in Q4 2010 (33.3 million units versus 31 million units).

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is this any surprise?
By Argon18 on 3/7/2011 7:17:21 PM , Rating: 2
This is how Microsoft "innovates". some things never change! this is exactly how did IE beat Netscape (give it away for free, destroy competition) how IE won the desktop OS wars (force OEMs to pre-install it on every machine) and how Microsoft generally does business. They can't compete on their technical merits (or lack there of) so they use their stockpiled $Billions to eliminate the competition. Disgusting. And it's us, the consumers, who are the losing party in this deal.

RE: is this any surprise?
By carniver on 3/7/11, Rating: 0
RE: is this any surprise?
By sprockkets on 3/7/2011 7:59:18 PM , Rating: 2
free != bundling

RE: is this any surprise?
By someguy123 on 3/7/2011 9:43:30 PM , Rating: 2
I think he's talking about how android is free, not that android devices are free.

RE: is this any surprise?
By bplewis24 on 3/7/2011 10:31:30 PM , Rating: 3
Google is the one destroying competition by giving Android away free.

That doesn't really make sense.

Essentially giving away Android to handset manufacturers for free encourages competition because it lessens the burdens/barriers of entry for each manufacturer/OEM.

Also, it forces handset manufacturers to compete with each other in rapidly developing new hardware and making compelling software for their devices (not always a good thing), thus speeding up the hardware turnover cycle and driving down prices faster.

Google isn't about destroying competition. Most of the markets they enter already have a major player in them.


RE: is this any surprise?
By someguy123 on 3/8/11, Rating: -1
RE: is this any surprise?
By Taft12 on 3/8/2011 12:06:30 PM , Rating: 2
Android being free is anti-competitive because it requires resources that very few have to make a reality.

What?? You and I have the same resources available to us that Google used and is using to build Android!

This is why the GPL is a good thing. Don't reinvent the wheel when you already have it sitting there right in front of you.

Operating systems are commodities now. Save your development resources for filling niches. That's the way the software world works today and we are all so much better off for it.

RE: is this any surprise?
By someguy123 on 3/8/2011 1:54:45 PM , Rating: 2
Yes it's open source but that doesn't mean you or I have the man power to produce a fully functional phone OS.

It's just insane that google gets love for this merely because it's open source. How are people going to compete with free software developed through a massive company like Google? It is the very definition of anti-competition when it comes to software, especially since they're not only developing, but also actively pushing and distributing.

If you appreciate what this does for the industry, that's another thing, but to deny that this stifles competition is ridiculous.

RE: is this any surprise?
By Landiepete on 3/8/2011 4:18:44 AM , Rating: 2
You're ignoring one of the basic realities.

Research an developement is expensive business. It takes a major investment, not only monetary, but also in time and effort to develope a cute idea into something useable. Morover, the return is unknown, and depends largely on the ability to monetize the outcome.

Google is in a position where it can constantly scan the market for things that look interesting or promising.
If they detect anything that tickles their fancy, the gigantic amount of money and resources they're sitting on allows them to develop an alternative at breakneck speed, and then 'give it away for free' to gain momentum. They do not have to worry about getting (ginger)bread on the table before a product gains the necessary traction to make it a success.
This is different to (e.g.) the strategy Microsoft has employed for many years, simply buying out small ompanies with promising tech.

Google is skewing the 'normal' supply and demand and R&D simply because they have too much money.

RE: is this any surprise?
By fishman on 3/8/2011 9:57:56 AM , Rating: 2
Google is skewing the 'normal' supply and demand and R&D simply because they have too much money.

The same is true for Microsoft. Look at how much money they have dumped on the Xbox before it became profitable. And they are willing to spend many billions on Windows Phone.

RE: is this any surprise?
By someguy123 on 3/8/2011 1:56:54 PM , Rating: 3
Yet people agree with you.

Point out that google is doing the same and people will ignore reality in favor of free software.

RE: is this any surprise?
By mcnabney on 3/8/2011 9:09:52 AM , Rating: 1
Your the one talking out of your arse if you didn't know that Kinnect wasn't developed by MS. It was made by Canesta, which MS bought. MS doesn't innovate. It bullies, leverages existing monopolies, and if that doesn't work it gets out the checkbook like in the case with Nokia.

RE: is this any surprise?
By seamonkey79 on 3/8/2011 9:37:37 AM , Rating: 2
The Kinect folks shopped around for places to sell themselves to.

They were turned down by everyone except Microsoft.

RE: is this any surprise?
By mcnabney on 3/8/2011 2:53:12 PM , Rating: 1
There are only three console companies.

Sony and Nintendo already had 'equivalent' technology.

But my POINT was that MS didn't develop the tech. They saw what the competition was doing and went shopping. Which is fine, but you can hardly claim it was 'your' bright idea.

RE: is this any surprise?
By PrezWeezy on 3/8/2011 7:31:05 PM , Rating: 2
Pretty sure that Android wasn't Google's brain child either.

No big company "innovates" if we use your criteria to define it. Look at any tech company, they buy other smaller companies who have the drive to create something brand new. And those little companies have a HUGE risk in doing so. Microsoft, et al, let someone else take the big risks and then provide to them a way to grow. That's all about pleasing your shareholders. Shareholders want 0 risk. It's part of business.

Sorry, but Google ain't no better than the rest.

RE: is this any surprise?
By Smilin on 3/8/2011 10:37:29 AM , Rating: 3
Your the one talking out of your arse if you didn't know that Kinnect wasn't developed by MS. It was made by Canesta, which MS bought
I think you mean Primesense. Microsoft partnered with them,and didn't buy them. Primesense had approached Apple first but was put off by their arrogance and draconian vendor rules. (in other words Apple can't do partnerships as well as Microsoft)

The primesense sensor is also but a small part of Kinect. The rest was done by collaboration between the Entertainment division and the R&D know the facial recognition, gesture extration? Directional mics combined with player location recognition and facial recognition to confirm a moving mouth. Primesense didn't do that crap. MS did.

MS doesn't innovate.

Man that argument is getting tired. It's been disproven over and over again. I know the rule is that if you repeat a lie enough that it becomes truth...that doesn't work here in the face of facts. They have the largest self created patent portfolio of all their competitors. 9Billion in R&D.

It bullies, leverages existing monopolies,
Actually it doesn't leverage existing monopolies. If it did it would violate the DoJ settlement which has been complied with 110% since it came into being. Outside of IE, and WMP player what have you seen included in the OS lately? Windows Live Essentials are free, why aren't they bundled? Apple does. Security bundled. Get it?

and if that doesn't work it gets out the checkbook like in the case with Nokia.

Don't forget that partnerships are innovation too. Microsoft is good at making win-win partnerships. I know Apple fans will agree :). Other companies don't pull it off as well. (AOL, Timewarner, Novell, etc.)

Mcnabney your whole post reeks of hatred and self induced ignorance. All of the big three: MSFT, Goog, AAPL have merits and all three have done some phenominal innovation and all three have recognized merits of others and incorporated them. You know that Android, iOS, and OSX weren't home grown right? MS-Dos 1.0 wasn't either but everything else since has been.

RE: is this any surprise?
By mcnabney on 3/8/2011 2:57:56 PM , Rating: 1
I can spend $9B on whores, it doesn't mean I know anything about sex.

Microsoft is only good at extending their monopoly. Take the Xbox for instance. They had to pillage PC gaming in order to build market share. Because RIM and Apple also had Office functionality Windows Mobile had to compete on their own innovation (without monopoly leverage) and they obviously failed. In this case with Nokia, MS is trying to outright BUY market share. They aren't even giving away the OS, like Google. They are paying companies to use theirs.

RE: is this any surprise?
By Smilin on 3/9/2011 4:25:14 PM , Rating: 2
Not really much point in talking to you if you're just going to spew hyperbole.

You think the Xbox is successful today because it somehow leveraged the Windows "monopoly"? Explain good sir...I'm all ears.

"microsoft doesn't innovate" is a tired argument disproven over and over and over and over again. Yet still the irrational nutbags come out of the woodwork to repeat it.

RE: is this any surprise?
By Laitainion on 3/7/2011 7:47:20 PM , Rating: 5
Well, I must say thank you for your vitriolic comment. It made me read up on the history of Windows which I actually found quite interesting. However, the questionable actions Microsoft undertook in the past I see nothing wrong with this deal, they and Nokia have arrived at a mutually beneficial agreement that provides both parties with something they want.

Microsoft gets to work with Nokia's experienced phone hardware/software engineers and Nokia gets a more modern phone OS than Symbian without the development costs, which unlike Android is not flooded with a profusion of different-yet-the-same handsets and makers.

As for the innovation comment, I have an Omnia 7 which is orders of magnitude better than my old Symbian-based Nokia, and I think better than either Android or iOS although I have never owned a phone with either. Android in particular appears to be an iOS copy which never struck me as anything special either.

RE: is this any surprise?
By Samus on 3/7/2011 8:56:18 PM , Rating: 2
The real problem with Andoid is the lack of quality hardware. Most of it (HTC, LG) is pretty low quality when compared to the 'feel' of an iPhone or Blackberry. I wouldn't even call the Samsung devices 'high' quality...

Sony Ericsson might be the dealbreaker though. SE has worked with Nokia for 15 years in software and hardware developement, especially Symbian and Li-Ion battery technology. You can't argue that SE phones are very high quality, at least on par with Nokia (who have the lowest defect rate in the cell phone industry by a huge margin.)

Looking forward, I think Nokia and Sony Ericsson will have killer quality hardware, and each will have a competing O/S. This is only a good thing for consumers; it'll drive down prices of the crap hardware for people who don't want/need a quality-built phone (is the Samsung Galaxy S REALLY worth $499 MSRP?) and it'll give consumers who demand quality products with a diverse selection of O/S's a wide variety of choices.

If somebody doesn't do something about the quality issues in the cell phone industry (terrible battery life, high defect rates, fragile housing...) then RIM will continue to do well selling old-school Blackberry's without needing to innovate their OS and Apple will continue to sell overpriced products with built-in life expectancy (think the speed of the iPhone 3G running iOS4.)

Microsoft HAD to do this. And it's not anti-competitive whatsoever. Infact, I'm sure, if Nokia can be restructured to actually meet product shipment deadlines and diversify their portfolio with WP7 from top-to-bottom, Microsoft will more than make their 1B back in royalties. Nokia could actually pull this off because half their upper management is ex-Microsoft and they hold an extraordinary interest in making Microsoft shares soar.

RE: is this any surprise?
By bplewis24 on 3/7/2011 10:33:51 PM , Rating: 2
I'd have to strongly disagree. HTC and Motorola have really pushed the envelope with their Android hardware. You can't really tell me that Blackberries or iPhones hold any advantage there.

The hardware has always been one of Android's strong suits. I think you're mistaking the low-end phones as being solely representative of the entire Android spectrum.


RE: is this any surprise?
By mcnabney on 3/8/2011 9:36:28 AM , Rating: 1
I think this deal might hurt Nokia in the long run.

MS has extrememly strict requirements, down to what buttons the phone can have where they buttons must go. The Android ecosystem actually allows for very different devices, while there can only be so much variation in a WP7 ecosystem.

Nokia sells a lot of different devices, especially in Europe. They will likely be hamstrung by Microsoft's device and design requirements and end up only being able to field a limited spectrum of devices. That will have to compete with a more attractive variety coming from Asian manufactures. The Me-Too market is already owned by Apple, so Nokia will have to compete for customers that want a nice choice between devices once they choose their platform.
I am also concerned that WP7 won't be found on scaled-down products - which is necessary in Europe which can't force more expensive hardware by subsidizing it with contracts like it can in the US. Should be interesting.

RE: is this any surprise?
By MartyLK on 3/7/2011 9:28:32 PM , Rating: 2
Your analysis doesn't hold water MS does have a highly viable mobile OS with WP7. An OS that is smoother and cleaner than anything else on the market. That isn't to say it is the best, only that it is smoother and cleaner and has the potential to be the best. MS said they would do whatever it took to make WP7 a winner and if they had put out a piece of crap mOS and still tried to do anything they could to make it a winner, your analysis would have merit. But MS does have a sweet system that are doing all they can to make it win.

RE: is this any surprise?
By oab on 3/7/2011 11:23:37 PM , Rating: 3
You remember that when Microsoft was giving IE out for free, Netscape was free too right?

The business model of Netscape was this:
Give away browser (Netscape Navigator)
Charge for browser suite (Netscape Communicator, included a mail client & etc. it cost $29.99)
Charge for the Netscape server software

Another reminder: Netscape had lost so much market share, and was in such trouble bringing Netscape 5 to market (as they had an almost unmaintainable code base) that they open-sourced it. The idea was the the open-source community would rally behind it, fix up its problems, and Netscape could leapfrog IE to version 6. Unfortunately, the Mozilla project took too long, Netscape was purchased by AOL, and AOL decided to keep using IE as their default browser (despite just purchasing a browser company).

The Netscape web server was undermined (in part) by Apache and IIS, and the generally failing fortunes of the Netscape company as a whole.

RE: is this any surprise?
By mcnabney on 3/8/2011 9:16:44 AM , Rating: 2
I think the point was the bundling.

IE was already installed, so for 95% of computer users they never thought to install another browser. This allowed MS to leverage the OS monopoly for a browser one too. As computers were replaced over the years, Netscape disappeared. It really is no different than Dumping. If you didn't know, that is when a business sells / gives away a product at a loss in order to put pressure on competitors.

RE: is this any surprise?
By Smilin on 3/8/2011 12:28:05 PM , Rating: 2
Microsoft basically got smacked for being forward looking.

They aregued at the time that the Web Browser is part of the OS and that argument fell on deaf ears.

Today the argument would have held. When you take a computer out of the box it's expected to: Play a CD when you pop it in, and surf the internet. Netscape was basically saying you should have to go actually get something separate to enable such things.

Netscape basically was offering something with little real added value so nobody bothered to switch.

MS sat on their butt with IE for 3 more versions and OTHERS decided to offer products of value like Firefox, Opera, Chrome etc and they are doing awesome in the marketplace. Netscape has nobody to blame but themselves.

RE: is this any surprise?
By mcnabney on 3/8/2011 3:04:18 PM , Rating: 2
Have you forgotten that Netscape 'created' Mozilla which lives on in Firefox.

RE: is this any surprise?
By Smilin on 3/9/2011 4:20:24 PM , Rating: 2

That just further illustrates my point. Firefox is thriving in the same environment that killed netscape. If it was so unfair then how is FF doing it?

Netscape shot themselves in the foot by trying to charge for a free commodity.

RE: is this any surprise?
By Da W on 3/8/2011 9:48:05 AM , Rating: 2
So what's the point? Everybody does this. Google acquires a new company every 2 weeks. Same for Apple.

RE: is this any surprise?
By callmeroy on 3/10/2011 3:43:16 PM , Rating: 2
You are trying too hard to hate Microsoft....calm down...

1) I never understand why they were sued for including IE with their OS...I think it was wrong they were found guilty of any bad doing there...I mean its their friggin OS, duh...of course they are going to include their browser. Its like if you by a GM car are you shocked that GM branded parts (ACDelco for instance if I'm not mistaken0 are used.

The only thing I did thing was stupid of MS is originally it was said "if you uninstall IE that basically would render the OS unusuable because the browser is integrated into the OS"...I'm glad they were found guilty on that angle of it.

2) Hate to tell you in your naive little world but this is how business runs. You think MS is honestly the only corp that ever made a deal that essentially amounted to a pay off for a business partner to NOT do something? If so ...holy crap you have a pure and rainbow bright view of the world.

3) Microsoft 'won' the desktop OS market because they were smarter about it. Apple distribution lagged behind Microsoft for years...particularly back in the Win 95 - Win 98 days...Microsoft simply got more copies of their product out the door AND on top of that...I honestly believe the flexibility of WinTel systems was attractive to many many people....where as apple was looked at as closed and propreitary...with a Windows system the user felt they had more options and more control -- software selection , peripherals and upgrade paths. That is a HUGE advantage for a computer OS to offer.

As for the OEMS being "forced" -- that is utterly ridiculous...yeah Microsoft FORCED their OS ....Microsoft is a SOFTWARE company first and foremost...they needed computers to use their product -- for their product to be worth anything...Thats like saying an engine manufacturer forced Ford to use their engines or ELSE! Absurd.

BTW -- for as long as I can remember (I build my own system s now) you could always chose 'no os' when you ordered from most computer companies. So that makes that point even less valid.

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