Did Nokia’s Android Dalliance Spur Microsoft’s Purchase?

Foxconn produced 10,000 Android-based Nokia devices

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Microsoft’s (MSFT) Windows Phone 8 is critical to the company’s future success in a world that’s going mobile.

Through a combination of aggressive marketing, competitive features, a push for apps and some helpful bumbling by BlackBerry (BBRY), the platform has seen significant growth this year. Windows Phone 8 is now in third place globally for market share at 3.7% and is the fastest growing mobile OS — although that’s relatively easy to pull off when you start low, the trick is to maintain the growth rate.

However, Microsoft was almost entirely reliant on Nokia (NOK), whose Lumia smartphones accounted for a whopping 80% of that Windows sales volume. And Nokia was considering jumping ship to Android.

At the time the blockbuster purchase was announced, Microsoft’s $7.2 billion deal to buy Nokia’s Devices and Services unit was presented as the most effective way for Microsoft to bring Windows Phone hardware development in-house. It fit Steve Ballmer’s vision to turn Microsoft into a devices and services company.

The acquisition also had the potential to fit neatly into the Ballmer succession plan by bringing back former Microsoft executive and current Nokia CEO Stephen Elop — the guy who made the call to skip Google’s (GOOG) Android as Nokia’s platform in favor of Windows.

Things are rarely so neat and tidy, and it only took a matter of days before news began to circulate that Nokia had Android running on its Lumia smartphones. With Nokia’s Windows Phones deal set to expire in 2014, this could have been written off as a pressure tactic designed to extract more favorable terms from Microsoft the next time around.

Things get uglier, though. It turns out that Nokia’s Android experiment had gone much further than engineers playing experimenting to get the competing operating system running on Lumia smartphones. Nokia had apparently reached the stage of having manufacturer Foxconn churn out 10,000 of the Android-based devices, code-named “Mountain View.”

Suddenly, Nokia’s Android experimentation seems less like a gambit to get rid of those Windows Phone licensing fees (somewhere in the range of $10 per unit), and more like a concerted effort to regain its smartphone market share.

Let’s not forget just how far Nokia has fallen…


Article printed from InvestorPlace Media, http://investorplace.com/2013/09/was-nokia-android-dalliance-the-reason-for-microsofts-purchase/.

©2014 InvestorPlace Media, LLC

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