On Monday, during the Mobile World Congress, Nokia Corporation (ADR) (NYSE:NOK) announced the release of three phones that will run a forked version of the Android operating system. The phones are set to be released as Nokia X, Nokia X+ and Nokia XL.
The conflict for Microsoft
This brings a bit of a conflict for Microsoft Corporation (NASDAQ:MSFT) who is acquiring the Finnish phone maker with the understanding that Nokia will manufacturing Windows phones. Certainly that was the idea. Now Microsoft faces the decision on whether or not it will continue to offer the line once the acquisition is completed later this year.
Microsoft essentially said today that until the acquisition is complete, Nokia’s decisions are theirs to make. This however, caused a split in analysts’ opinion as to whether Microsoft would continue with the manufacture of the phones using the the new Android Open Source Project (AOSP).
In a blog post today, Frank Shaw, who heads corporate communications for Microsoft wrote the following: “First, our transaction with Nokia has not yet closed,” Shaw wrote. “Today, we operate as two independent companies as required by antitrust law, and we will until the acquisition is complete.”
Former Microsoft executive Hal Berenson who presents a much-followed dialog on Microsoft said, “Nokia can not change its actual plans based on the discussions with Microsoft [emphasis in original],”
Shaw pointed out while the phone doesn’t run Windows like the higher-end Lumia line, it does run OneDrive, Outlook.com, and Microsoft property Skype. “This provides the opportunity to bring millions of people, particularly in growth markets, into the Microsoft family,” Shaw argued.
But Shaw saved his most telling comment for near the end of his blog. “Our primary smartphone strategy remains Windows Phone, and our core device platform for developers is the Windows platform,” wrote Shaw.
There is a fair amount of cross-over between the two companies. Steven Elop, Nokia’s CEO worked for Microsoft for years before taking the job in 2010. Once the acquisition is complete, Elop will return to Microsoft and head its device division. Elop recently suggested that Microsoft make keep the line.
“There’s a lot of people in Redmond very excited about being able to reach, literally, tens of millions of people who have no other way of having an experience with Microsoft,” Elop told re/code’s Ina Fried.
Analysts weigh in
Ben Bajarin, an analyst with Create Strategies seems to agree.
“While the Nokia X is an attractive product for first-time smartphone customers…, there is a more significant first that could play out if these devices are successful,” Bajarin said in a piece published to Techpinions Monday. “Nokia will successfully bring potentially hundreds of millions of new customers into the Microsoft ecosystem by giving them their first Microsoft ID.”
“This is the most important strategic objective, in my opinion, for Microsoft,” said Bajarin. “Nokia sits at the heart of Microsoft’s comeback. Forking Android and going after the next billion smartphone customers may just be crazy enough to work.”