Second-generation Nokia Android phones show Microsoft's new priorities

In the mobile market -- at least the higher-volume, lower-cost part of it -- the new Microsoft is looking to make money on services, not operating systems.
Written by Mary Jo Foley, Senior Contributing Editor

Some didn't believe it would happen. Others didn't want to. But on June 24, Microsoft took the wraps off the second generation, Android-powered Nokia X2 phones.


The move shouldn't have been such a surprise, yet to many, it was.

Top Microsoft execs, including Devices business chief (and former Nokia CEO) Stephen Elop and operating system group head Terry Myerson both indicated earlier this year that Microsoft was planning to put its muscle behind the Nokia X phones. The official line has been that these phones provide Microsoft with a gateway for potentially getting new users interested in Windows Phone.

One key -- if not the key -- to these Nokia Android phones is the set of Microsoft services that are preloaded and/or available for the devices.

The core is the consumer services trinity: OneDrive, Outlook.com and Skype. These are the consumer cloud services that Microsoft is hoping it can parlay into business service demand somewhere down the line.

It's also interesting that Microsoft's OneNote note-taking app is available for the Nokia X2s, too. OneNote is one of the core investments for the company -- right alongside Outlook.com/Exchange, OneDrive/SharePoint and Skype/Lync.

Microsoft is making Windows available for zero dollars (a k a free) on phones and tablets with screen sizes of under nine inches. That means the company is counting less and less on the Windows operating system as a revenue source. Instead, services and applications are where Microsoft management are looking to earn money -- through ads, subscriptions, premium upgrades, etc. -- in the future.

Seen through that lens, the Nokia Android phones are vehicles for Microsoft's future revenue sources -- just as Windows Phones are -- now that the Windows Phone OS is free. That's why I bet there could be a generation three, four and more of Android-based phones in the pipeline from Microsoft.

For a company that's emphasizing "cloud first, mobile first," the claim that "More people are now connected to the Microsoft cloud through Nokia X" fits right in.

While on the topic of the Nokia X phones, I noticed a couple of surprising (at least to me) things about the second-generation phones unveiled today:

1. The default browser is Opera. While IE isn't available on Android, Microsoft's choice of Opera is not what I'd have predicted, given past wranglings between the two companies.

2. Those who bought the first-generation Nokia X, X+ and XL devices won't be getting the updated version of the "X platform," which includes a new homescreen pane and other performance and UI updates. Microsoft is attributing this to incompatible hardware. Officials say more updates will still come to the first-generation Nokia X phones to improve users' experience, however.

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