Yes, Nokia Should Have Chosen Android, Not Windows Phone (Premium)

Many Nokia fans have long complained that Stephen Elop’s decision to back Windows phone over Android was a strategic mistake that destroyed the company. I, meanwhile, had argued otherwise.

Turns out we were both wrong. Yes, Nokia should have chosen Android over Windows phone back in 2011. But not for the reasons that those Nokia fans voiced.

Back in 2013, I argued that Nokia was right to choose Windows phone. And I was right to do so, given the information we had at the time. Nokia chose Windows phone, we were told, because Microsoft granted the firm special status among its licensees. They collaborated with Microsoft on the evolution of the platform, which provided Nokia with the control over its own destiny that it required.

“What Nokia gets that is unique on Windows Phone is an inroad into actual platform design and development,” I wrote at the time. “It is essentially co-creating Windows Phone, and helping to determine where this platform goes next. It is pushing its own technologies—especially the HERE location apps and services—right into the OS itself, something that is not possible for other Windows Phone partners, nor for those who support Android. It’s a way to one-up the openness of Android, if you will, without all the nasty forkiness.”

I also argued at that time that had Nokia adopted Android then, it simply would have been yet another Android handset maker, a small fish in a big pond. It would have lost its uniqueness and its natural advantages. And when you combine that with its manufacturing overhead—a key contributor to its demise—it would have disappeared even more quickly than it did.

“Had Nokia adopted Android instead of Windows Phone, it wouldn’t have been able to benefit the wider Android ecosystem as it can with Windows Phone, and it would have effectively had to start over with yet another Android spin-off, similar to what Samsung and Amazon have done, rather than just help improve the actual platform,” I explained. “More problematically, it would have been a small player in a big market, more akin to HTC or LG than to Samsung. In Windows Phone, Nokia is the king.”

But now, we have new information, courtesy of a Finnish book about Stephen Elop’s years at Nokia which was just translated, poorly, to English. And based on a source who was present at meetings between Google and Nokia ahead of Elop’s announcement about adopting Windows phone, a different story emerges.

And, yes, this changes everything.

“Google offered Nokia, among other things, plenty of say in choosing the direction of Android development,” the book notes. “By directing Android development to align with its own competitive goals, Nokia would gain some advantage, even if the changes would be available for everyone at the same time. Now Nokia was interested.”

In other words, Google was willing to provide Nokia with the same ability to drive the evolution of Android as Microsoft was with Windows phone.

“According to a source present, Google seemed to really want Nokia to join the Android world,” the book reads. “The company ensured that Android can be customized more than Nokia understood, especially compared with Windows Phone. Even if Google was criticized continuously for having Samsung, HTC and Sony Android phones differ from each other too much, but Nokia would be given leeway to create its own user experience. Google saw that Nokia differentiated from the competitors in that it had a global area of operation. Nokia would be able to create better local services and user experiences for network providers and customers, one person present remembers being evaluated. The Nokians also had noticed, that they were living partially in danger of misinformation. Nokia could continue with Android with its own maps side-by-side with Google’s maps. The same applied with the app store. Nokia’s music service as well as ovi.com could continue, as long as the phone had Google Play.”

And there was a huge reason why Google was willing to give Nokia special access: Nokia still had serious market share in developing markets. As you may know, this is an area where Google has since tried and failed to succeed with Android (with Android One, originally).

“Android and Nokia had an area where their interests converged in a brilliant way: Developing countries,” the book continues. “If Android could be made to work on cheap hardware, Nokia would be best at getting in through in developing markets. The arrangement was enticing. Google would secure the position it was dreaming of in smartphones, and Nokia would become part of virgin Android markets … Nokia was able to learn that Google worked Android into clearly cheaper models than Windows Phone.”

There was even a financial angle.

“Google made a substantial offer regarding distribution of income,” the passage continues. “Nokia would have gotten a portion of the income from Google’s search engine, app store, and other services which originate from Nokia phones, and the terms would be in relation to Nokia’s influence in the ecosystem … Google’s promise was quite exceptional, considering that Nokia would still have been able to keep its own services in its phones. [And] contrary to what Nokia has claimed [publicly], Google was ready for concessions. It was ready to flex as far as it could in the framework of [the Open Handset Alliance], and even then some more.”

This is … incredible.

Nokia could have had the same insider access to Android that it eventually received from Microsoft for Windows phone. And yet it chose an unproven and closed platform over Android. Why on earth would it do this?

Part of the reason, I think, was that Windows phone was closed. With Android, Nokia’s contributions to the platform would have eventually made their way to the firm’s competitors. Elop, with his Microsoft and closed platform background, probably perceived Windows phone’s lack of openness as a real advantage.

“The arguments for Microsoft became better day after day,” the book adds. “Microsoft needed Nokia more than Google. They could not risk letting Nokia jump over to Google’s ship, because it would be the beginning of the end for Windows Phone. Microsoft promised Nokia its own app development as well as innovation. Doing things themselves was part of Nokia’s culture, so Microsoft assured that they would suit them better than Google. Nokia would be able to influence the end result. Both companies were challengers, and they both had a common enemy.”

But the book suggests another damning reason as well. Nokia ultimately chose Windows phone over Android because of a financial windfall.

Google had offered to buy or license Nokia’s vast patent portfolio to give Android an advantage and provide Nokia with some much-needed cash. But Nokia needed billions of dollars to push forward, and Google could only promise this money over time. So Nokia started tilting further towards Microsoft. And the software giant complied with Nokia’s financial needs.

“[Nokia] thought to ask a large sum of money,” the book says of a set of meetings in January 2011. “[The firm] had calculated correctly. Microsoft had come to the conclusion that it could not afford to let Nokia slip from its hands.”

“The contract was completely different from what Microsoft had made with other manufacturers,” this passage continues. “It included marketing money, decreased license fees, and special rights with regards to technology … Nokia would get its ecosystem and the driver’s seat for Windows Phone. The special status was only achieved, according to Elop, because Nokia promised to do everything it can for the benefit of Windows Phone. The arrangement included a commitment not to use other smartphone platforms.”

“The details of the contract are still mostly secret. It is known that Microsoft promised to pay Nokia $250 million a quarter to support the platform. Microsoft would buy licenses for Nokia’s patents and would put money into the marketing of Windows Phone. The sums to be used for marketing or the wishes regarding them were not detailed in the contract. They would be decided case-by-case. Nokia would pay royalties of about $15 per device to Microsoft for using Windows Phone. There was a minimum sum per year for royalties, which Nokia would be obliged to pay regardless of the sales volumes, and the sum would increase over time. The base fee would be, for a long time, bigger than the minimum royalties. The royalties would start running only when phones were in sales, so in the beginning, Nokia’s cash flow was strongly on the receiving end.”

Google, infamously, lashed out at Microsoft and Nokia when the deal was made public.

“Two turkeys do not make an Eagle,” Vic Gundrota [tweeted](Two turkeys do not make an Eagle) at the time.

“I guess they did not like the decision,” Elop later said.

Increasingly, it is obvious that no one should have liked the decision. And that Nokia’s choice was, in fact, a huge mistake. One that cost Nokia its very existence. The “Nokia” that exists today is a sad shell of its former self. And Windows phone, of course, was a spectacular failure on every level. One that Microsoft is still wrestling with today as the rest of the mobile market marches forward.

So there you go. If I find any other nuggets in the book, I’ll let you know.