Microsoft-Nokia pact signed, success by no means assured

Microsoft logoAnnounced back in February, the Microsoft-Nokia agreement that will result in Nokia using Windows Phone for its high-end smartphones has finally been formalized.

In announcing that the agreement has been signed, the two companies outlined four main features of the relationship: sharing of technology and ecosystems, royalties, cash injections, and intellectual property licensing.

It's the first of these that will have the most visible end-user impact. As expected, Nokia will bring its considerable mapping and navigation expertise to Microsoft's platform. The Finnish company will also guide the platform's hardware design, and contribute towards improving the operating system's language support. Microsoft, in turn, will provide Nokia devices with Bing-powered search and access to Redmond's productivity, advertising, gaming, and social media services.

Microsoft will be given access to Nokia's existing operator relationships, letting Windows Phone developers take advantage of Nokia's 112 operator billing agreements spread across 36 different markets. Registered Nokia developers will, in turn, be given free registration for Windows Phone development. Nokia will also be opening a new application store built on top of the Windows Marketplace infrastructure, creating a single store through which developers can sell to Windows Phone, Symbian, and Series 40 devices.

The remaining points were all essentially financial. Perhaps as an effort to reassure other Windows Phone licensees, the companies confirmed that Nokia will be paying a royalty to Microsoft for the software, rather than being given it for free. There will, however, be considerable cash flows in the other direction too; Nokia will receive payments "measured in the billions of dollars" for its contributions, confirming previous reports, and further "substantial payments" for the right to use its intellectual property.

Plenty of questions remain unanswered, however. The blog post announcing the agreement mentioned that goals of the two companies included "new price points," and that Nokia devices would offer "unique innovation and differentation across hardware, software and services." The full scope of these "unique innovations" is still unclear, and the possibility that Nokia might fragment the platform remains.

While Symbian and Android are both available on a diverse range of hardware, Windows Phone and iOS are both tightly regimented, and though this may limit those platforms' reach in some ways—there will always be some users who aren't happy with the narrow range of devices available—the consistency does have advantages to both users and developers alike. For users it provides familiarity and ease of use; for developers, it greatly reduces the testing and design burden. A range of phones with, for example, lower resolution screens or slower processors would have the effect of breaking existing software for the platform, a move unlikely to be popular.

The royalty issue is sure to be of interest to other Windows Phone OEMs. The statement suggested that Nokia would be receiving some form of discount (its pricing will be "competitive" and will "reflect the large volumes" that both companies are hoping Nokia will ship), a fact that may not sit well with the existing OEMs—OEMs that took a risk on an unproven, brand-new platform, and OEMs that have, unlike Nokia, actually sold real devices to end users. Nokia may hope for high sales, but that's a long way off at the moment.

New questions are also raised, particularly on the subject of Nokia's new application store. If the Windows Phone portion of that store is Nokia-specific, it could end up disenfranchising users of other handsets. Windows Phone Marketplace does already have a provision for OEM-specific applications, but these are for the most part restricted only to those applications that the OEMs themselves have developed for their own handsets. A Nokia-specific Marketplace that's open to third-parties would place non-Nokia devices at a material disadvantage, a move that would alienate users and OEMs alike.

The release schedule also remains vague. The plan is still for Nokia to start volume shipments in 2012, with some form of limited release, speculated to coincide with the release of Windows Phone 7 "Mango" later this year.


In some ways, the Nokia-Microsoft agreement is simply an extension of existing relationships between the companies. Microsoft already licenses data from Nokia's Navteq mapping subsidiary, and has produced a Silverlight runtime for Symbian. There was also a plan to bring Office Mobile to Symbian. Though this appears to have fallen by the wayside, the language of the announcement suggests the project has been resurrected.


Expectations for the partnership are high. In 2010, Gartner analysts predicted that Windows Phone would bomb, taking Microsoft's smartphone market share to below 4 percent by 2014. The Nokia partnership caused a complete about turn, with Gartner predicting that it would now trump iOS and lie second only to Android by 2015. IDC made a similar prediction. Both beliefs are predicated on Nokia managing to convert essentially all current Symbian sales into future Windows Phone sales. Giving Windows Phone the flexibility to have a similar reach to Symbian, giving Nokia the concessions that it wants to make its devices unique, all while keeping other OEMs on-side and avoiding platform fragmentation is going to be a tough balancing act for Microsoft to manage. The partnership certainly has potential, but success is far from assured yet.


Source: Ars Technica

Tags: Microsoft, mobile phones, Nokia

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