Why Microsoft should welcome Nokia's new Android phones

Why Microsoft should welcome Nokia's new Android phones

Summary: If you think Nokia's decision to introduce a line of Android-powered phones is a threat to Microsoft, think again. With Microsoft's new "devices and services" emphasis, these phones are a logical fit, even after the acquisition closes.

TOPICS: Mobility

According to the conventional wisdom, Nokia’s decision to launch the new Nokia X line is a slap in the face to Microsoft. An insult, an embarrassment, a major headache that Microsoft management will have to confront soon, when the acquisition of Nokia closes.

That conventional wisdom, frankly, makes no sense to me. When Microsoft announced the deal to acquire Nokia's Devices and Services business last fall, it acquired the rights to use the Nokia brand name for existing mobile devices, and it also embraced the Asha line and its distinctly non-Microsoft operating system as "an on-ramp to Windows Phone." These new Android-based devices are just another piece of that puzzle.

Microsoft’s archrival in the mobile market is Google, not Android. Microsoft’s services – Office 365 and Outlook.com, OneDrive cloud storage for consumers and businesses, communications via Lync and Skype, among many others – work on multiple platforms. They compete on most of those platforms with Google services, like Gmail and Google Apps and Google Drive and Google+ Hangouts. Bing competes with Google Search. Nokia’s powerful mapping services compete directly with Google Maps.

If you’re looking only at the OS and apps, you’re missing the point. Microsoft’s reinvention for the cloud era, begun under CEO Steve Ballmer and certain to continue under his successor Satya Nadella, is transforming it into a “devices and services” company. Devices, not operating systems. Services, not apps.

If you think Microsoft cares most about the royalty it charges a device maker for the OS license, you’re several years behind. Of course the company would be happy to collect that one-time OS royalty from a device maker, but they’re equally eager, if not more so, to have the buyer of that device paying for international Skype calls, for an Office 365 subscription, and maybe even for an Xbox Live Gold account. Over the life of a phone, the revenue from those services can easily be an order of magnitude greater than that OS royalty.

Microsoft wants its services, along with those of its partner and soon-to-be-subsidiary Nokia, to be front and center on a mobile device. It’s easy to do that with Windows Phone and Windows 8.1 mobile devices, where Microsoft controls the platform. It’s much more difficult to replace Google services on new Google-certified Android phones, where those services are set as defaults, as a condition of acceptance into the Google Play ecosystem.

The new Nokia X, targeted at “growth economies,” is built on top of the Android Open Source Project codebase, which doesn’t come with those Google gotchas. Nokia’s custom interface looks remarkably like a Windows Phone. CNET’s report from the Nokia launch event at Mobile World Congress describes a home screen that includes an assortment of Nokia and Microsoft services, with Google’s alternatives nowhere to be found. Facebook and Twitter are included, of course, but so are Skype, OneDrive, Outlook.com, Nokia Here Maps, and Nokia Mix Radio.

Nokia's Android powered X and XL smartphones

Image credit: Sarah Tew/CNET

Microsoft’s Bing is the default search engine on the Nokia X line, and everything is connected to a Nokia Store, which will presumably be run by Microsoft after the acquisition closes.

Ironically, Nokia’s Android-free Asha line, which is targeted at emerging markets, looks remarkably Android-like, at least on devices that adopt the smartphone form factor.

Nokia's low-cost Asha phones

And it’s not exactly waving the flag for any Microsoft or Nokia services – about the only recognizable brand on that home screen is Facebook.

Building on the AOSP base with a Windows Phone look-alike interface on top is obviously a winner for Microsoft services, which are front and center on the Nokia X devices. As a bonus, that architectural decision allows the company to preserve Windows Phone as a premium brand, even on relatively low-cost devices in developed economies, like the sub-$99 Lumia 520 and 521 in the United States.

It’s possible that a Microsoft-owned Nokia could someday make a premium handset based on that same Android code base, using high-quality hardware similar to today’s Lumia-branded devices but running a successor to the software introduced today on the Nokia X. Those devices could conceivably compete with top-of-the-line Android phones for those who prefer the Android UI (and its selection of apps) but want Microsoft services (especially Office apps) in place of Google’s.

If Microsoft can get smartphone buyers to use its services, it should be perfectly happy to see those services running on a multitude of platforms, including iPhones and iPads, Android devices of all types, and Windows-powered phones and tablets. The experience should be identical, regardless of the code it's running on top of. Microsoft’s paid services bring in steady revenue streams. Its free services bring in advertising dollars and keep customers out of Google’s hands.

Anyone who thinks that Microsoft has to choose between Windows Phone and Android is missing the point. In a market that comprises more than a billion new devices a year, a platform that’s a distant third can still be a serious and profitable business. Even if Windows Phone stalls out at a seemingly puny 10 percent of the market, that represents 100 million devices a year. And if Nokia-branded devices running Microsoft and Nokia services on top of AOSP can snag another 10 percent of the market in Asia, India, the Middle East, Africa, and Latin American, why turn those customers down?

That fundamental desire to run its services on as many devices as possible – its own as well as those made by other companies – is a defining characteristic of Microsoft’s new business model. It's already building apps for Android, and Skype customized its Android app specifically to run on the Nokia X line. That's not exactly the action of a company that feels insulted.

In the not-so-distant past, Microsoft’s ambition was easily stated: “A PC on every desktop, running Microsoft software.”

The more modern version of that vision is subtly different: “Multiple computing devices of all shapes and sizes, in every home and business, running Microsoft services.”

Update: It's clear that Microsoft thought about this issue while it was negotiating the acquisition of Nokia's Devices and Services business. From the September 2013 press release announcing the deal:

Microsoft will acquire the Asha brand and will license the Nokia brand for use with current Nokia mobile phone products.... This element provides Microsoft with the opportunity to extend its service offerings to a far wider group around the world while allowing Nokia’s mobile phones to serve as an on-ramp to Windows Phone.

Asha and Android at the low end as an on-ramp to Windows Phone at the high end? Makes perfect sense to me...

Topic: Mobility

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  • One Windows across many devices?

    What happened?
    • WhoRUKiddin: "What happened?"

      It's been changed to "one Windows across many *premium* devices". Windows is, as of today, a premium OS. And, by extension, Internet Explorer is a premium web browser.

      And never mind that Microsoft will drop the price of Windows 8 for low-end laptops and desktops to better compete with Android desktops, Chromebooks and Chromeboxes.
      Rabid Howler Monkey
      • Premium?

        Nah, Microsoft is the bargain basement of technology like Google. Apple is the ONLY PREMIUM out there.
        • In terms of CAPABILITIES ...

          ... Windows, Mac OS X, and Linux are interchangeable. They are all premium. They are all scalable. They are all fully-functional preemptive multitasking systems.
          M Wagner
          • You have to forgive him! ;-)

            He's a fanboi! lol
          • Fan boys, fan boys, what are y'all going to do ..?

            When K42 is released all other DIGITAL operating systems are going to be obsolete. So I guess Linux Windows and OX10 could still be used in a VM setup but why would anyone want to run an obsolete system virtually on a superior system ??? Fan boys are facing obsolescence.
            ivvan iskra
      • Nokia X is a side show

        Compare the X specs to the 520. The only real differences are 1/2 the memory and a smaller camera. And with the 520 being had off the MS store for $59, it's actually 1/2 the cost. With WP 8.1, it could support smartphones with 4 GBs of memory by loading apps and media on a microSD card. As such, there was absolutely no reason to bring this device to market. MS' biggest mistake has been focusing on premium devices. The 520 has been the best selling Nokia phone by a wide margin since it was released. Now Motorola states its G phone is the best selling Motorola phone of all time. Note to MS: do the inverse of what you're doing now - put 80% of your resources into low-cost and midrange smartphones and leave the remaining 20% for the high-end phones. Give me a Nokia Nexus 5 running WP 8.1 for $325 and let's see what happens.
    • What do you mean "what happened"?

      Who says MS can't pursue that for those that are looking for that, while making something else for all the rest?

      I don't think MS would have any issue making money from Android on the side via phone sales.
      It all goes to the bottom line, which is a good thing, right?
      • Such a turnabout...

        Be sure you don't strain your neck.
        • Not really, Jesse

          I speak from the factual, and practical, unlike many others her that will just throw in their two cents (which is really .000025 cents based on the 'honesty' of the info they posted) that just want MS or whoever to be their big bad guy.

          All I ever said was that I don't use Android/Google products, MS and Apple have the bases covered for me in terms of delivering on what I need or want, and I see no reason to change.

          MS is a device company, too, and if they can make some money from Android, why not?

          Speaking of neck strain, I don't know how some of you guys do it - posting while having your heads continuously spinning 360 degrees while spewing pea soup, whenever posting about MS.
      • Who says MS can't? MS did.

        They had that already. There was a system on M letter. No, not Meego. Everybody knows what system I mean.

        So, they had it, they had well working system ready to ship, with the full basic application set. And MS decided that Nokia should close it (I heard that it's because this would be a competition for Windows). Soon they have also announced that Windows will be also installed in low-end phones (once S40 series are no longer able to be upgraded).

        So, now they are coming back to the idea of their own linux-based system. This is not exactly Android because it's without Google Play. So they have to redo the whole job they have done 2 years ago by the people that they have fired.

        There is one explanation for that: they just took advantage of the fact that Android is such a strong brand (more than 60% of the market share), and they have seen how Jolla carries on.

        But it's too late.
      • the windows'year in the phone... when it use androide...lol

        Windows' year in the phone not yet? LOL...but ur don't lose hope....perhaps now with androide...ha,ha.

        'Who says MS can't pursue that for those that are looking for that, while making something else for all the rest?'...that was said about Nokia when it was Nokia (use androide, while develop own tech)...but you and yours MS' buddies said the opposite...which as you will observe, not only your agenda but also demonstrates the absurdity of your thoughts as well as the cheap that your 'services' are.
        Marco nn
    • Baby steps ...

      It doesn't matter if you come in the front door or the backdoor as long as you get in the game. If you can bring Microsoft services onto an Android-derived (open-source) codebase, you cut Google out of the picture. Competition is good.
      M Wagner
  • I agree with the article in great extent

    I've been saying it for long, as a device and services company being platform agnostic is a good idea.
    I don't agree WP can grab 10% share though, it's very behind that and there are no signs of big changes anytime soon.
    • I don't think Microsoft has plans for high end AOSP

      or even middle range, it seems to me that they want to eventually push out Surface Phones.
      As for reaching 10% - if they can get their act together on the WP/SurfacePhone OS and it's app store, I think they could get to 10% with the help of corporations using them as secure devices to their own information as well as a private use phone. And with those being high end users paying on the higher end of the scale for services, that would be fine with them.
      okay, admittedly a BIG "If".
    • already has

      In several major markets WP is already at 10%.
      widow maker
      • No it has not

        Worldwide share is around 3%, in Q4 share was actually smaller than q3.
        They don't reach 200 millions with a share of 10% in Latin America or Dubai.
        • They also just lost their biggest auto customer...

          Ford is dropping windows as too expensive and buggy.

          Going instead with QNX.
          • This works perfect for BB

            Especially that QNX is "traditionally" a system used in car control systems.
          • Ford dropped the ball.

            If you have followed auto OS development you would know that Ford has been slow to adapt to anything. No updates, no available on many vehicles, old outdated information. Ford botched software in the auto big time by not understanding what consumers need or want.