Remember Nokia (NOK)? It used to be the top name in smartphones. No longer. However, the company had a plan: work with Intel (INTC) and create a new super duper operating system called MeeGo. Nokia supporters kept saying, "What about Android? What about the iPhone? Just wait until MeeGo phones hit the market." Only, they'll have to wait even longer now, as Nokia dropped its first MeeGo phone before it launched.
No word from Nokia as to why. Was it a problem with the hardware? Was MeeGo effectively vaporware? The issue is something more fundamental that came out in a memo written by CEO Stephen Elop, as Chris Ziegler reported in Engadget. The company is standing on the deck of a sinking ship, and if it doesn't jump into the cold ocean waters, it's doomed.
But jumping means abandoning the "not invented here" syndrome and buying into another vendor's platform. That sounds like either Google (GOOG) Android or Microsoft (MSFT) Windows Phone 7.
The memo, at the end of the Engadget post, is as stark and realistic a one as I've seen come from a CEO's office. What it says is what some outside critics and analysts have said for some time. At the moment, Nokia is like a man starting to keel over from a heart attack. The question is whether it can apply the paddles quickly enough to shock a rhythm back into its system.
Besieged on all sides
The company faces attack in every market segment. Apple has snatched the high end smartphone. Android came in at the high end and pushed down into mid-market through Google's use of the Windows model: make the operating system and get as many vendors as possible to use it. Chinese manufacturers have taken more than a third of the low end market.
What did Nokia do? Watch it all happen. Maybe it took an outsider like Elop to say to the company what others had said: Nokia was slow. As Elop noted, at the rate it's moving, Nokia will have only one MeeGo phone in the market by the end of this year. Nokia's old Symbian operating system isn't competitive in North America, cutting it out of a big market. Chinese vendors design and launch handsets faster than "the time that it takes us to polish a PowerPoint presentation."
Elop's summation is downright scary:
We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven't been delivering innovation fast enough. We're not collaborating internally."This means we're going to have to decide how we either build, catalyse or join an ecosystem," Elop wrote. And that brings us back to word that the first phone with MeeGo will be a no show.
Nokia can't solve this problem on its own
We'll find out on Friday, but I can't help but think that Elop has decided that Nokia can't solve this problem on its own. Even working at breakneck speed, it cannot possibly hope to catch up. Developing something new would take too long, as would getting MeeGo ready. Symbian isn't competitive enough. What to do? Buy into someone else's ecosystem.
Not Apple, obviously. That leaves Google, Microsoft, or possibly HP (HPQ), with the webOS platform that it bought with Palm. But webOS didn't do so well when Palm tried to sell phones.
Going with Google, meanwhile, would put Nokia in the thick of the clone wars without much differentiation. Also, Google offers no indemnification for the increasing number of patent actions that it and its hardware partners have found themselves in. Nevertheless, Android has become more mature, has a version for tablets, and had demonstrated wide consumer acceptance.
Jump for the Windows
Microsoft is trying to get traction with Windows Phone 7, but that's been slow going. At the same time, the company does indemnify vendors and the operating system is decent for a first version. Plus, Elop used to be in Microsoft management, so getting a deal done shouldn't present too many difficulties.
Given Elop's ties to Microsoft and the chance to have something robust without being just another voice in the woods, Windows Phone 7 would be the logical pick. Whatever the choice, it would be an improvement in what Nokia was currently doing and might provide a bridge off the burning platform.
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