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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 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.


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