Nokia, soon to be acquired by Microsoft Corp, is
turning to software created by arch-rival Google
for a new line of phones it hopes will make it a
late contender in the dynamic low-cost
smartphone market.
Its first models, Nokia X , X+ and XL , rely upon a
open version of the Android mobile software
system created by Google that has become the
world's most popular software used in
smartphones.
The release of the phones just days before Noki
sells its handset business to Microsoft in a $7.
billion deal, is an attempt to stay relevant in
emerging markets, where low-cost Android
phones are being snapped up by hundreds of
millions of buyers.
Nokia Chief Executive Stephen Elop said the
market had "shifted dramatically", and the group
needed to address a sub-$100 segment that is
set to grow four times faster than more
expensive phones.
He told a crowded press conference at the
Mobile World Congress trade fair in Barcelona
that rather than being an 180-degree turn in its
strategy of using Microsoft's Windows Phone fo
smartphones, it was a move that introduces the
"next billion" users to Nokia's hardware and
Microsoft's services.
"We see the X family being complementary to
(Windows Phone) Lumia at lower price points,"
he said. "Even as you see Lumia push lower an
lower, you will see us push lower with Nokia X
below that."
But the strategy shift underlines the many
missteps made by the Finnish company since
Apple launched its ground-breaking iPhone in
2007.
Nokia was caught between a rock and a hard
place - committed to using Microsoft's Window
Phone software but needing Android software t
reach more cost-sensitive customers, CCS
Insight's head of research Ben Wood said.
"That a company soon-to-be owned by
Microsoft, the creator of the original operating
system, is moving to Android is almost an
"admission of failure", he said.
Global smartphone shipments grew 41 percent
annually to reach nearly 1 billion units in 2013,
according to market research firm Strategy
Analytics. Android phones from dozens of
handset makers accounted for almost four out
every five smartphones sold, or 781.2 million
units.
In the past year, Apple shipped 153.4 million
smartphones worldwide for a 15 percent share
the market, making it the second largest
smartphone platform after Android.
Microsoft was a distant third in market-share
terms, shipping 35.7 million units worldwide
with its Windows mobile software platform, but
still struggling to gain traction in the low-tier
and premium-tier smartphone categories,
Strategy Analytics said.
Windows shut out
In February 2011, Elop famously compared
Nokia's failing smartphone strategy - based on
multiple software platforms of its own making -
to a man on a burning platform.
He chose to jump into the arms of Microsoft,
producing high-end Lumia-branded smartphone
that have been well received by critics, but less
popular with customers and app developers, the
people who make the software that turns phone
into multi-purpose tools.
Elop said on Monday he had not jumped the
wrong way.
"There's quite a lot of vendors ... who made the
Android decision but couldn't differentiate," he
said. "We wanted to build with Microsoft a third
ecosystem, and that's what we are doing while
others fall by the wayside."
But the Microsoft technology does not work on
the chip sets found in cheaper smartphones, th
fast-growing market crowding out Nokia's Asha
feature phones, which lack the full Internet
capabilities of smartphones.
The company rejected Android three years ago,
when it tied its fortunes to Microsoft's Windows
Phone. But Monday's announcement shows it
has quietly been working on an open Android
device for months.
Product Marketing Vice President Jussi
Nevanlinna told Reuters the number one
requirement from customers was access to
Android apps.
"Our fans oftentimes tell us 'We love your
hardware, we love your products, but we also
love our Android apps'," he said. "Can you mak
something happen so the Android apps magical
run here?'"
IDC analyst Francisco Jeronimo said Nokia had
made a "rational move" that allowed it to
address a much bigger market, but it should
have been made three years ago. "It would have
given Nokia a complete different position from
where it stands today, under Microsoft's control
he said.
CCS Insight's Wood also said Nokia needed to
do something dramatic in low-cost
smartphones: "Asha has failed to deliver the
volumes they needed to be competitive in the
low-cost smartphone space, while Android
remains completely rampant."
The Nokia X family uses the open source versio
of Android, which runs most apps without the
right to customise Google's basic software.
For Nokia, it was a question of making this
humiliating reversal in its strategy or facing
irrelevance in this category of phones, Wood
said.
Nokia services
The open version of Android software means th
the new Nokia phone does not have rely on
Google's services and access to the Google Pla
app store. Instead, Nokia is bundling it with its
own music and map offers, and Microsoft's
email, cloud, messaging and search services.
Apps will be available in Nokia's own app store,
as well as a host of other app stores, Elop said.
The look of the Nokia X devices is starkly
different from the usual Android phone, with
nods to Lumia and Asha interfaces.
Elop said rather than confusing customers, Noki
X - where X indicates a cross between Nokia
hardware, Android apps and Microsoft services
will be a stepping stone to Lumia, and will shar
the same cloud services.
"Lumia continues to be our primary smartphone
strategy," Elop said. "Lumia is where we will
continue to introduce the greatest innovation.
Wood said Nokia and Microsoft had an
advantage over other users of open Android,
such as some Chinese manufacturers, in that
they had a ready-made set of services that they
could slot into the phone.
"It means Nokia is able to participate in that
entry-level space, but our view is they will try t
push Windows Phone down into that space as
quickly as possible," he said.
Nonetheless, devices running an open Android
operating system will not sit easily within
Microsoft, whose fortune is founded on the core
belief that software should be paid for.
The Nokia X, which has a four-inch screen, will
be available immediately, Nokia said. The X+,
with more memory and storage, and XR, which
has a five-inch display, will be on sale early ne
quarter priced at 99 Euros and 109 Euros,
respectively.
They will be on sale in all markets apart from
Japan and Korea, where Nokia is not present, an
North America.
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