Back at MWC 2011 Nokia suddenly announced that it would be making a partnership with Microsoft to use Windows Phone on Nokia smartphones. The move was very odd considering that reports claim Intel, Nokia's partner for MeeGo OS, was only notified the night before the announcement. The move left many people wondering what Nokia was thinking since Android is much more popular on the market today.
The motives behind Nokia's choice for Windows Phone on its smartphones are becoming clearer today with Bloomberg reporting that sources are saying that Microsoft has agreed to pay Nokia a cool $1 billion to use its mobile OS rather than go with Android. Nokia's new CEO Stephen Elop, who is a former Microsoft exec, claimed the movie was due to the fact that Nokia feared it wouldn’t be able to differentiate itself from all of the other players in the Android market today.
The fact that Google wasn't offering a billion to use Android undoubtedly had something to do with the decision. Nokia will pay Microsoft for each copy of Windows Phone that it will use. These same sources claim that the contract between Microsoft and Nokia will run for five years. I can’t help but think this is a very bad move for Nokia. It might get a billion dollars from Microsoft, but Windows Phone is nowhere near as popular as Android or the iPhone making it an also ran with little traction compared to other major OS on the market today.
I also have to wonder if shareholders will be happy with the move considering stock prices at Nokia have continued to slip since the partnership with Microsoft was announced. The decline is stock price is significant with Bloomberg reporting that stock prices have dropped a whopping 26% since the announcement on February 11. That is 26% in less than a month. One of the sources claims that the $1 billion was to keep Nokia from going with Android and many though Android was where Nokia was leaning. I have to wonder if this move will eventually be the undoing of Nokia, which is already on very shaky ground in the high-end smartphone business. The next version of Windows Phone had better be really, really good.