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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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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.

"This is about the Internet.  Everything on the Internet is encrypted. This is not a BlackBerry-only issue. If they can't deal with the Internet, they should shut it off." -- RIM co-CEO Michael Lazaridis

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