BARCELONA, Spain – Tonight’s press conference with CEO Stephen Elop at the start of the Mobile World Congress was devoted to delivering clarity. We got a candid yet detailed insight on Friday’s announcement of a strategic partnership with Microsoft to use its operating system for Nokia smartphones. This post covers Stephen’s initial explanation of his and the Nokia Board’s choice.
Stephen wanted to clear up some of the things that perhaps were explained in less detail at Friday’s Finance and Strategy Briefing and, as he said, add some “colour” to the announcement.
There were three possible options for Nokia’s future, he explained. It might pursue the internal route and rely on Symbian and MeeGo to see Nokia through to regaining its mobile crown through further and faster development. Second, the company could go to Google and become another licensee of the Android platform. Third, it could become a licensee of Microsoft’s Windows Phone.
Looking at the pace and performance of Symbian and MeeGo over recent years was enough to discount the first choice. Of course, he then talked to Google and Microsoft, the only two realistic external choices.
Both companies were keen. Nokia has a massive global footprint and retains an enormous market share. Nokia was, in Stephen’s words, “suited” by both companies.
So why choose Microsoft over Google? It’s all about how it affects the mobile ecosystem.
If Nokia had gone with Google, it would have been another Android licensee and handed Google massive share. The world of mobile phones would have become a “duopoly” – Google versus Apple.
Going with Microsoft might look counter-intuitive, given the lower market share and youth of that mobile operating system.
However the point, Stephen said, was exactly that. Microsoft has everything to gain by supporting Nokia’s venture in creating devices with its operating system. Windows Phone is a challenger in the mobile space, not one of the current incumbents.
Here’s the way the deal works: Nokia pays Microsoft royalties, it gives Microsoft unprecedented reach, it also gives them access to services such as Maps. Nokia’s hardware expertise creates devices that truly let the Microsoft’s new OS shine.
In return, Nokia gets a substantial reduction in its operating expenses; it gains a range of services to enrich its smartphone offering. There’s a new revenue stream for Nokia in the form of mobile advertising. It gets marketing support with a value of billions of dollars.
The real point is that there’s a co-dependency between Nokia and Microsoft – both partners need the other to fully succeed. That’s part of what makes it the right choice.
The other part of this is about new ecosystems. There are two flourishing apps and services ecosystems currently, Apple’s and Google’s. The combination of Nokia and Microsoft creates a third choice: that’s good news for consumers and good news for the whole of the mobile industry. More choice and more competition drives everything forward.
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