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

Foxconn produced 10,000 Android-based Nokia devices

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

In 2007, Nokia smartphones topped 50% of global shipments, but have now sunk below 4%. In early 2011 — when Nokia ditched its own Symbian mobile OS and signed on with Windows — its market share was still nearly 25%. While Windows Phone 8 has been on an upswing, it’s possible that had Nokia chosen to go with Android in 2011 it could be sitting at double digits today instead of being ignominiously lumped in with the “Others” category in sales charts.

That’s a position that’s tough to swallow for a company that was the largest seller of mobile devices for 14 years running and watched its stock drop by 90% as competitors like Samsung (SSNLF) rose to a dominant position by hitching themselves to the Android train.

In hindsight, it seems likely that Microsoft’s move to buy Nokia wasn’t destiny. It wasn’t about bringing a Windows Phone champion back into the fold, it wasn’t about getting synergy between the software and hardware teams, and it wasn’t to avoid the expense of developing its own Surface smartphones.

It was to prevent its primary smartphone hardware vendor from jumping ship and either abandoning Windows Phone altogether, or at least offering Android alternatives.

Either outcome would have had a serious effect on Windows Phone 8 smartphone sales and raised doubts about the platform’s future. It’s bad PR if the partner responsible for 80% of your market goes to another operating system. Other hardware partners have been few and far between, and the bad vibes from Nokia ditching wouldn’t have left any of them eager to take up the slack.

It’s unlikely we’ll ever know if Nokia could have recovered any of its past glory if it switched to Android (unless that Microsoft deal comes apart at the last minute).

Personally, I have my doubts. In 2011, Nokia had a shot of carving out a slot. Today, Samsung is solidly entrenched on top of the heap, Chinese manufacturers like ZTE (ZTCOF), Lenovo (LNVGY) and Huawei are covering all the price ranges while expanding their North American presence, and smaller players like Sony (SNE) have filled in many of the premium niches. Nokia has its fans, but breaking into the Android market in a meaningful way from scratch in 2013 — let alone in another year — would be a tough slog.

For Microsoft, though, there was no happy ending to that scenario. Buying Nokia to prevent it from turning to Android was the only course of action to protect the already tenuous Windows Phone 8 market from a collapse.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


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

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