(Adds comments, updates shares)
By Tarmo Virki
HELSINKI, June 24 Nokia NOK1V.HE will pay
$410 million for the remaining shares in UK-based smartphone
software maker Symbian and make its software royalty-free to
other phone makers, in response to new rivals such as Google
The world's biggest cell phone maker said on Tuesday it
would contribute Symbian's assets to a not-for-profit
organisation in which it would unite with leading handset
makers, network operators and communications chipmakers to
create an open-source platform with wide industry appeal.
Symbian software is used in two-thirds of smartphones --
mobile handsets with computer-like capabilities -- but Apple
Inc's (AAPL.O) iPhone or new categories of phones based on
Google's Android software could challenge that dominance.
"It indicates that Nokia is worried by the rise of
lower-cost operating systems from Google Android and LiMo
Foundation," analyst Neil Mawston from Strategy Analytics said
on Tuesday. LiMo is an industry consortium to promote the
popular free Linux software on phones.
Symbian was formed exactly a decade ago to the day in
London by a consortium of top mobile handset makers looking for
a standardized way of building software to run new phones. It
was the descendant of software used to run Psion electronic
organizers popular with business professionals in the 1990s.
Symbian's closest rival is Microsoft's (MSFT.O) Windows
Mobile operating system, which has just 13 percent of the
market despite the U.S. software maker's drive to gain share.
Microsoft charges $8 to $15 per phone, according to
research firm Strategy Analytics, while Symbian has charged, on
average, $4.10 a device.
"This puts a lot of pressure on Microsoft right at a time
when they are trying to really push into the consumer space,"
Gartner analyst Carolina Milanesi said of Nokia's bid to drop
royalty prices. "For operators this offers a good alternative
to Android," she said.
Microsoft said Nokia's move was likely to confuse operators
and handset makers with unwanted extra choices and said it
would not change its own strategy as a result.
"Absolutely not," said Scott Rockfeld, group product
manager at Windows Mobile. "We've seen more Linux consortiums
come and go than Linux mobile phones."
LiMo, with members across the industry except for Nokia,
welcomed the move as creating a structure similar to its own,
with software open for all to use.
Google spokesman Barry Schnitt hailed Nokia's move to open
up Symbian. "Openness fosters innovation, benefiting consumers.
We're very pleased to see other major players in the mobile
industry moving in this direction," he said.
Nokia, which makes 40 percent of all cell phones sold, will
pay 264 million euros ($410 million) for the 52 percent of
Symbian it does not own. But the move will save it money as its
big market share means it now pays more in royalties to Symbian
than it gets from its share of Symbian royalties from others.
NEWER, FASTER PRODUCTS
Other members of the new not-for-profit Symbian Foundation
are Sony Ericsson (6752.T), Motorola Inc MOT.N, NTT DoCoMo
(9437.T), AT&T Inc (T.N), LG Electronics (066570.KS), Samsung
Electronics (005930.KS), STMicroelectronics (STM.PA), Texas
Instruments Inc TXN.N and Vodafone Group Plc (VOD.L).
Nokia will give Symbian and its S60 software assets to the
foundation, while other members said they will lend their UIQ
and MOAP software to create a joint Symbian platform in 2009.
"It offers us an opportunity to innovate faster on a
bigger, united, more widely accepted platform," Kai Oistamo,
head of Nokia's devices business, said. "It also enables us to
deliver new products, we believe, faster to the market."
The first phones based on the existing software will be
unveiled shortly after the closing of the transaction, he said,
while phones using a completely new version of the software
would reach consumers within the next two years.
Nokia expects the deal, accepted by all shareholders except
Samsung so far, to be completed this year and dilute profits
through 2009. On a reported basis, Nokia expects the deal to
reach break-even in 2010, and begin to boost earnings in 2011.
"The biggest surprise is that Nokia gets full ownership all
at once, and at a good price," Karri Rinta, analyst at
Handelsbanken, said of the long-coveted Symbian franchise.
Shares in Nokia rose 0.4 percent to 15.73 euros, slightly
outperforming the DJ Stoxx European technology index .SX8P.
(Additional reporting by Marc Roca in London, Georgina Prodhan
in Frankfurt, and Sakari Suoninen, Julie Breton and Rauli
Laitinen in Helsinki and Eric Auchard in San Francisco; Editing
by Quentin Bryar/Paul Bolding/Braden Reddall)