Financial analysts are cheerleading for Nokia to switch over to Windows Phone 7, in advance of a big announcement by Nokia CEO (and former Microsoftie) Stephen Elop on February 11. With its global market share declining, Nokia needs help—but that's not the help it needs.
Turning Nokia into a manufacturing house for Windows Phone 7 devices would require a massive cultural shift, would give up one of Nokia's major strengths, would potentially slow down decision-making even further, and would put Nokia at a disadvantage to Samsung and HTC.
Rather, I'd like to see Nokia announce at least three MeeGo-based smartphones next week, or at least a clear plan for a strong lineup based on the Linux OS.
Wall Street analysts have hated Nokia for a while, so this isn't a surprise. Part of the problem seems to be Nokia's invisibility to U.S. residents; because the company abandoned the top end of our market a few years ago, analysts underestimate Nokia's outsized impact in the rest of the world. That's a mistake.
Nokia sells a huge number of low-end feature phones every year. The company risks becoming a manufacturer of low-end feature phones, with little strength in the high-end and smartphone markets. This is a huge issue because smartphones are where most of the profits are, and where the technology pipeline for future mass market phones starts.
Staying out of the U.S. doesn't seem to have hurt Nokia's feature-phone sales much. But by being absent from the U.S., Nokia also somewhat insulated itself from the beginnings of the most recent round of the smartphone OS wars. Apple's iPhone hit first and hardest here, followed by Android, Palm's WebOS (for what it's worth), and Windows Phone 7. This is also one of RIM's core markets.
That meant Nokia's software started looking weirdly disengaged from the global trends that started here and later spread. Symbian as it stands is an ugly mess that only makes sense to existing Symbian users. Since Nokia lives in a land where everyone already uses Symbian, it didn't see the threat caused by newer, more usable operating systems.
Why Not Windows Phone 7?
Nokia would have to shift its business model and culture quite dramatically to become a Windows Phone 7 house. There are two kinds of mobile-phone companies—integrated platform companies and hardware OEMs that use other people's software. That's a simplification, of course; the hardware OEMs like Samsung, Sony Ericsson, and HTC constantly try to set themselves apart by adding tinsel and gewgaws to Android, and RIM's integrated platform is heavily Java-based.
Nokia has always been an integrated platforms company. Even when Symbian was a "foundation," Nokia still ran the S60 platform. To give that freedom up would mean a bigger change than just getting that original mission right. And to become completely dependent on Microsoft for its software might slow Nokia down even further, as every major product decision would need to be approved by two notoriously bureaucracy-laden companies.
If Nokia decided to just become a hardware OEM, the company would be competing with Samsung, LG, HTC, and all of China. That's already a very busy space with some very high-quality players that are much more attuned to that business model than Nokia. I find it hard to believe that Nokia could successfully differentiate in that crowd.
Build or Buy, But Don't Give Up
A recent slide on the Internet showed Nokia's massive R&D budget. It dwarfs Apple's. What the heck are these people working on, cold fusion? Hopefully, it's MeeGo.
We're at a big turning point for mobile operating systems right now. A bunch of mobile OSes from the late 1990s are all simultaneously proving to not be up to the challenges of the 2010s, so we've been watching their makers face up to that reality and write future-facing products. Palm came first, then Microsoft, then RIM. Apple and Google are safe (for now) because their OSes are newer. Nokia needs to swallow hard, realize Symbian is now a low-end feature-phone platform, and move on.
To a great extent, Nokia right now is in the position RIM was a year ago. RIM got aggressive: it identified its problem—that its core OS wasn't designed for the media-heavy experiences consumers now demand—and started moving towards a solution by buying Torch, QNX, and TAT. If it executes well, it could pull this transformation off, with a compelling tablet offering this spring and some "super phones" coming this fall. If RIM doesn't execute well it's doomed, but you could say that about any business venture. Palm didn't execute well and was doomed; now it's getting a second chance under HP.
Nokia doesn't need to abandon its software arm. It needs to have a next-generation OS. MeeGo could absolutely be that OS. Like Android, it's Linux-based, but with its own take on things. I've played with Nokia's Maemo devices (MeeGo's predecessors) and they're full of interesting ideas, but Nokia never bothered to develop or sell them beyond the super-geek stage. Obviously, MeeGo needs a polished, consumer-friendly UI. Maybe some of that R&D money could help there; like RIM did, Nokia could afford to buy a design firm. (Click below for a slideshow of Maemo devices.)
If MeeGo's problem is that Nokia is waiting for Intel's mobile-ready x86 chipsets, Nokia needs to tell Intel to hit the road. It's time to commit.
The Symbian-MeeGo transition will be gentler than others, because of Qt. Nokia has been priming its developers to move over to this cross-platform framework for a while now, and if I understand it correctly, Qt makes it very easy for apps to move from Symbian to MeeGo. That's a much smoother path than RIM, Palm, or Microsoft offered to their existing developers.
The first step to solving a problem is to admit you have a problem. Nokia needs to admit Symbian is a problem. On that, Wall Street and I agree. But I don't think that Nokia needs to give up its entire mission and business model to succeed.