Going With Android Could Leave Nokia in Deep Water; Would Windows Be Smarter?

Last Updated Sep 22, 2010 11:19 AM EDT

The day that new Nokia (NOK) CEO Stephen Elop took office, the stock took a nosedive. But it wasn't Elop's arrival that caused markets to swoom, but rather the announced delay of the new N8 smartphone.

It's not the first postponement the phone has seen, and one of the issues has been the new version of the Symbian operating system. Some say that switching to Google (GOOG) Android would be a smart move. However, Anssi Vanjoki, Nokia's former head of the smartphone division who resigned when Elop's hire was announced, disagrees. In a Financial Times interview, he said that it would be temporary relief at best, like Finish boys who pee in their pants in the winter to keep warm. And although I think that a shake-up in Nokia management is long overdue, he makes a good point.

Vanjoki's analogy is about a desperate move that someone takes to stay comfortable. Even if it helps for a short time, clothes get soaked and start to conduct heat out of the body even faster, leaving the lad more vulnerable than ever. That's how he sees adopting Android. It would provide a short break, but too quickly would become a liability, as the FT notes:

Combining Nokia's great hardware with Google's great software would do wonders for sales. As for margins, Nokia sinks a tenth of its handset division's revenue into research and development, three times as much as Apple. UBS reckons Nokia could cut annual R&D spending by about €1bn a year if it stopped working on software, lifting the division's operating margin by 400 basis points.
All well and good, but you don't necessarily support sustainable business by looking to cut every expense. If all handset vendors used Android, it would become difficult to make a product stand out from the crowd. You might do it with a smart hardware design, but eventually you'd have to consider how to distinguish the software, because code is as much a part of the product as components. If you don't, then the operating system eventually becomes a commodity and doesn't add to perceived value of the phone. That way leads to low margins.

Google does allow modifications of Android, but then a company is back to software development. Adopting what someone else does is not necessarily easy and you might not get the time savings that eliminate product introduction delays. As more hardware vendors change the OS, you get an increasingly fractured market (as if Android didn't have enough problems with that). Say hello to compatibility problems among a sea of almost similar platforms for app developers to navigate. Without the ready supply of apps, an Android phone loses an important competitive face-off with Apple's iOS.

How about an alternative? Instead of Android, Nokia could consider Microsoft (MSFT) Windows Phone 7. It would be a bitter pill to many, and ironic, given that Elop used to head a division there. Such a move could offer a breathing spell until MeeGo is ready and would have the advantage of being a high profile move to an operating system that might be good enough to do the job. In addition, as so much of the world jumps on the Android bandwagon, it would certainly be distinctive.

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.