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Why Nokia’s Android snub is a big mistake

The handset maker is banking its future on its new MeeGo OS. But success would come much easier if it just gave Google some love.

In a market nowadays dominated by Google’s Android, Apple’s iOS, and BlackBerry OS, it’s pretty easy to overlook Nokia. The cell phone giant, which made a name for itself in the 1990s and early 2000s with striking cell phone designs has seen its global majority market share steadily decline, raising questions about how it (if at all) will make a comeback.

One simple solution would be to copy another one-time tech giant – Motorola – and hand off the software side of its business to Google and just concentrate on making incredible hardware. But that doesn’t seem to get the pulses racing in Finland. Instead, the company is determined to double-down on its now aging strategy.

In an interview last week, Niklas Savander, Executive VP of Nokia’s Markets, argued that adopting Android would effectively outsource Nokia’s “destiny.” Nokia (NOKBF) would have no way to add value to the Google platform, therefore it won’t even consider using the free and fast-growing OS. Instead, like a beaten-down horoscope reader, Nokia continues to believe that it must continue down the current path toward its destiny. That means relying on an open-source Linux-based OS called MeeGo that will power new smartphones, like the oft-rumored N9, when they begin emerging later this year.

Of those, only the latter is probably worth keeping. The others are double-down betting on a strategy that has yet to excite app developers or consumers.

Clearly, Nokia wants to remain in the same league as RIM (RIMM) and Apple (AAPL), which develop both hardware and software. Makes sense: having ownership over both can be extremely lucrative and, theoretically, enable a better-working machine. But that situation only works when people want both the hardware and the software.  Have you heard many people swapping stories about mind-blowing MeeGo apps?To be fair, Nokia only released its early developer build of MeeGo in June. But the app-based OS starts off with a distinct disadvantage. It is several years behind Apple and Google and even RIM, which has been late to realize the new “app-or-bust” smartphone reality. Plus, when a final version hits, MeeGo will likely go toe-to-toe with Windows 7 phones, due out circa holiday 2010, and what ever webOS device HP (HPQ) eventually cooks up.

As AT&T mobility and consumer markets president and CEO Ralph De La Vega pointed out during the Brainstorm Tech conference, there’s only so much room for competing mobile OSes — and Nokia is charging into an already crowded space.

Savander’s argument that the company could not add value to Android also doesn’t hold. With Google’s (GOOG) Android OS, Nokia would have the luxury of working with a free, established open-source mobile OS that allows for nearly limitless options, including tweaks to the OS’s appearance and underpinnings. HTC already does that with its successful Sense interface. Other companies have figured out way to use open source to drive growth, most famously IBM (IBM), which has refashioned its entire $37.3 billion Global Technology Services business out of making open source work.

And that brings us back to Motorola (MOT), the company that Savander should be looking to as what to do right. In the last two years, Motorola dropped its own Linux-based smartphone OS and Windows Mobile in favor of Android. It got in touch with its Razr roots and went on to develop hardware that consumers craved. The company’s second quarter sales of $5.4 billion beat estimates, due in no small part to the Droid and Droid X.

Creating a Nokia-friendly skin for Android would allow the company to allocate more resources to its real strength — hardware — and get stellar products to market faster. And in making the big leap to Android, the move could transform Nokia’s image from mobile “has-been” to resurrected contender, something which RIM failed to accomplish with its BlackBerry 6 OS and BlackBerry Torch launch. Instead, Nokia’s future now depends entirely on the following:

  • The critical and public acceptance of a new, unproven OS in a market already saturated with millions of Android, iOS, and BlackBerry OS-loaded phones.
  • Heavy promotion from carriers. This could be a particular challenge for the manufacturer, which has admitted that establishing relationships with domestic carriers will be a challenge. (As an example of what can happen when a carrier gives up on an OS, see Verizon’s Palm Pre.)
  • Developer support. Will third-party developers, who have enough options to develop for — and worry about — want to devote resources to yet another OS? (Some developers have expressed early concerns about MeeGo’s viability on message boards.)

Regardless, Nokia has work to do, and a lot to prove, in the months and years ahead. But if the company had tied its wagon to Android — or heck, even Windows Mobile 7 — its success would be more assured.

Update: In an earlier draft, we referred to Motorola’s $5.4 billion as earnings, however that figure applies to the manufacturer’s sales.