By Paul Sandle
BARCELONA Feb 24 Nokia, soon to be
acquired by Microsoft Corp, is turning to software
created by arch-rival Google for a new line of phones
it hopes will make it a late contender in the dynamic low-cost
Its first models, Nokia X, X+ and XL, rely upon an open
version of the Android mobile software system created by Google
that has become the world's most popular software used in
The release of the phones just days before Nokia sells its
handset business to Microsoft in a $7.2 billion deal, is an
attempt to stay relevant in emerging markets, where low-cost
Android phones are being snapped up by hundreds of millions of
Nokia Chief Executive Stephen Elop said the market had
"shifted dramatically", and the group needed to address a
sub-$100 segment that is set to grow four times faster than more
He told a crowded press conference at the Mobile World
Congress trade fair in Barcelona that rather than being an
180-degree turn in its strategy of using Microsoft's Windows
Phone for smartphones, it was a move that introduces the "next
billion" users to Nokia's hardware and Microsoft's services.
"We see the X family being complementary to (Windows Phone)
Lumia at lower price points," he said. "Even as you see Lumia
push lower and lower, you will see us push lower with Nokia X
But the strategy shift underlines the many missteps made by
the Finnish company since Apple launched its
ground-breaking iPhone in 2007.
Nokia was caught between a rock and a hard place - committed
to using Microsoft's Windows Phone software but needing Android
software to reach more cost-sensitive customers, CCS Insight's
head of research Ben Wood said.
"That a company soon-to-be owned by Microsoft, the creator
of the original operating system, is moving to Android is almost
an "admission of failure", he said.
Global smartphone shipments grew 41 percent annually to
reach nearly 1 billion units in 2013, according to market
research firm Strategy Analytics. Android phones from dozens of
handset makers accounted for almost four out of every five
smartphones sold, or 781.2 million units.
In the past year, Apple shipped 153.4 million smartphones
worldwide for a 15 percent share of the market, making it the
second largest smartphone platform after Android.
Microsoft was a distant third in market-share terms,
shipping 35.7 million units worldwide with its Windows mobile
software platform, but still struggling to gain traction in the
low-tier and premium-tier smartphone categories, Strategy
WINDOWS SHUT OUT
In February 2011, Elop famously compared Nokia's failing
smartphone strategy - based on multiple software platforms of
its own making - to a man on a burning platform.
He chose to jump into the arms of Microsoft, producing
high-end Lumia-branded smartphones that have been well received
by critics, but less popular with customers and app developers,
the people who make the software that turns phones into
Elop said on Monday he had not jumped the wrong way.
"There's quite a lot of vendors ... who made the Android
decision but couldn't differentiate," he said. "We wanted to
build with Microsoft a third ecosystem, and that's what we are
doing while others fall by the wayside."
But the Microsoft technology does not work on the chip sets
found in cheaper smartphones, the fast-growing market crowding
out Nokia's Asha feature phones, which lack the full Internet
capabilities of smartphones.
The company rejected Android three years ago, when it tied
its fortunes to Microsoft's Windows Phone. But Monday's
announcement shows it has quietly been working on an open
Android device for months.
Product Marketing Vice President Jussi Nevanlinna told
Reuters the number one requirement from customers was access to
"Our fans oftentimes tell us 'We love your hardware, we love
your products, but we also love our Android apps'," he said.
"Can you make something happen so the Android apps magically run
IDC analyst Francisco Jeronimo said Nokia had a made a
"rational move" that allowed it to address a much bigger market,
but it should have been made three years ago. "It would have
given Nokia a complete different position from where it stands
today, under Microsoft's control," he said.
CCS Insight's Wood also said Nokia needed to do something
dramatic in low-cost smartphones: "Asha has failed to deliver
the volumes they needed to be competitive in the low-cost
smartphone space, while Android remains completely rampant."
The Nokia X family uses the open source version of Android,
which runs most apps without the right to customise Google's
For Nokia, it was a question of making this humiliating
reversal in its strategy or facing irrelevance in this category
of phones, Wood said.
The open version of Android software means that the new
Nokia phone does not have rely on Google's services and access
to the Google Play app store. Instead, Nokia is bundling it with
its own music and map offers, and Microsoft's email, cloud,
messaging and search services.
Apps will be available in Nokia's own app store, as well as
a host of other app stores, Elop said.
The look of the Nokia X devices is starkly different from
the usual Android phone, with nods to Lumia and Asha interfaces.
Elop said rather than confusing customers, Nokia X - where X
indicates a cross between Nokia hardware, Android apps and
Microsoft services - will be a stepping stone to Lumia, and will
share the same cloud services.
"Lumia continues to be our primary smartphone strategy,"
Elop said. "Lumia is where we will continue to introduce the
Wood said Nokia and Microsoft had an advantage over other
users of open Android, such as some Chinese manufacturers, in
that they had a ready-made set of services that they could slot
into the phone.
"It means Nokia is able to participate in that entry-level
space, but our view is they will try to push Windows Phone down
into that space as quickly as possible," he said.
Nonetheless, devices running an open Android operating
system will not sit easily within Microsoft, whose fortune is
founded on the core belief that software should be paid for.
The Nokia X, which has a four-inch screen, will be available
immediately, Nokia said. The X+, with more memory and storage,
and XR, which has a five-inch display, will be on sale early
next quarter priced at 99 euros and 109 euros, respectively.
They will be on sale in all markets apart from Japan and
Korea, where Nokia is not present, and North America.