Analyzing Nokia’s Possible Entry into the Android Ecosystem

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It’s amazing how pumped up the rumor mill is in 2013. It’s been a couple weeks since we celebrated New Year and already we've heard major rumors regarding mighty corporations such as Intel and Apple. While Intel is thinking of jumping into the living rooms with its set-top boxes, Apple might be looking at launching a mini iPhone soon. And now, it’s the Finnish phone maker that has the stage.

Rumors are that Nokia (NYSE: NOK) may be thinking of entering the smartphone OS ecosystem that it has repeatedly challenged and considered to be unsustainableGoogle’s (NASDAQ: GOOG) Android platform. When the Spanish newspaper El Pais asked Nokia CEO Stephen Elop about a possible Android phone from Nokia, Elop answered:

In the current ecosystem wars we are using Windows Phone as our weapon. But we are always thinking about what’s coming next, what will be the role of HTML 5, Android… HTML5 could make the platform itself — being Android, Windows Phone or any other — irrelevant in the future, but it’s still too soon [to tell]. Today we are committed and satisfied with Microsoft, but anything is possible.

The newspaper reported the story in Spanish and Gizmodo translated the comment. Presently, as per the agreement with Microsoft (NASDAQ: MSFT), Nokia receives platform support payments from the Windows maker and the figure amounts to $250 million (€196 million approximately) each quarter. In return, Nokia pays Microsoft fees for using the Windows Phone platform. Through this contract, Microsoft is trying to create a set-up where it can have the loyalty from Nokia. However, this agreement is a non-exclusive one and thus Nokia has the full authority to move to the Android ecosystem and side by side work equally hard on the Windows ecosystem.

Analyzing the move
So, is this going to be a good move on the phone maker’s part? Let’s analyze the situation and start by asking, is there a market for Nokia on Android? The answer is a Yes. Actually there is a huge segment of the market that has been waiting for such a thing. Say Nokia launched the Lumia 920 with an Android OS. I know there are people who will jump at the device in a heartbeat. The only thing that has kept them from buying the device is the OS. Believe it or not, many are not very happy about the Windows Phone 8 also.

Let me share with you my personal experience. I recently upgraded my laptop OS from Windows 7 to Windows 8. After using it for a few days, I realized the OS doesn’t appeal that much to me. First of all, definitely as per Microsoft’s plan, everything is being synced through my Hotmail account. That is something I am not happy about since I use a different email account for my profile on Facebook, Tweeter and Linked In. Secondly, there is not much extra that I am able to do with the OS. Was the first few hours of use was exciting? Sure. But then it got monotonous and the lack of good apps is a mega problem.

Next, it’s not a good idea to keep all the eggs in a single basket. By relying only on Microsoft, Nokia may be making a huge mistake. It’s true the Windows maker is paying a huge sum to Nokia each quarter as platform support payments and it’s likely that the giant will use the huge cash pile on its balance sheet to spend heavily in making the platform relevant and popular. Through all these, Nokia can definitely benefit.

However, it’s also likely that Microsoft will soon look at building its own smartphone, just like it did with the Surface. In such a situation, Nokia’s lifeline may turn out to be its biggest competitor and only Android will be in a position to help the phone maker battle its present software partner. Furthermore, Nokia is not the only Windows Phone maker. Though Nokia has a hold on the majority of the Windows Phone market, even companies such as Samsung and HTC are working with Microsoft. Just the way Microsoft didn’t rely on only one phone maker, Nokia also shouldn’t rely on only one OS maker.

Again, looking purely at Nokia’s interest, I feel Nokia should welcome the change. Windows Phone market is too small and Nokia’s ability to meet market demand is much higher. Even if Nokia gets its hands on a lion’s share of the WP market, its hold on the global smartphone market will still be negligible. Android can do justice to Nokia.

Now, let’s take a look at a few factors for which adopting Android may turn out to be a problem for Nokia. Many industry experts and analysts believe that Nokia should focus on only one OS at the moment. Since it has started with Windows Phone OS, it should continue with that and extract the most from it. Only then should it think of diversifying. Nokia still hasn’t recovered from its fall and should take time to strengthen its core capabilities before jumping at every opportunity to expand fast.

Again, many believe that if Nokia starts focusing on both the platforms, it will not be able to maintain its quality and also there will be poor integration between the platforms. Just like Apple makes tailor-made handsets for its iOS, Nokia should make tailor-made handsets for Windows and give its customers the best user experience.

Concluding thoughts
From the discussion above, it seems there are more pros than cons and I’m sure, you understand that I am supporting the Android adoption. Working on Android power handsets doesn’t mean Nokia will have to break terms with Microsoft. I feel the company should make handsets for both the platforms and let the end users choose which OS they want to use on Nokia handsets.

The talks of Nokia entering the Android ecosystem are pretty exciting. However, it’s not known how soon this shall happen or if this shall happen at all. Though Elop saying “anything is possible” hints that the company may be contemplating also adopting Android, he also clearly stated that in the current war on ecosystems, Nokia’s weapon is Windows Phone and the company is focused on the same. Elop is glad about the fact that Lumia 920 has been a big success and he foresees that in the days to come Nokia will gain double-digit market share and will “establish an equilibrium with the other two big ecosystems, Apple and Android”.

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