Analysts say that Nokia is unlikely to make Android-powered smartphones

Google’s operating system would not help Nokia to stand out from its rivals

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The world’s largest mobile phone manufacturer Nokia is hardly likely to start using Google’s Android operating system to run its smarphones, say some Nokia analysts.
      Analyst Ben Wood of the market research company CCS Insight believes that Nokia would not get a lot of benefit from Android, as it would not help the company to stand out from its rivals.
     
Among the large mobile phone manufacturers, Samsung, LG, Sony Ericsson, and Motorola all use the Android operating system. Wood stresses that all manufacturers using the Android operating system are constantly considering ways to stand out from their rivals and thinking of their dependence on Google.
      ”The holy trinity in the mobile phone business refers to the combination of hardware, software, and services. Nokia has all three and by combining them the company plans to open up a new kind of user experience”, Wood notes.
     
In mass markets, Apple is the only company among Nokia’s rivals that owns the same three factors, while the rest are more dependent on services made by others. Such services include for example music business, mobile social networking applications, as well as maps and navigation services.
      ”By introducing Android Nokia would enter the markets that are already crowded, and it would not help Nokia to stand out from its competitors”, Wood argues.
     
According to a rough estimate by Richard Windsor, a global technology specialist at the investment bank Nomura, Nokia has spent approximately EUR 0.5 billion on the development of new operating systems based on the Symbian 3 and Symbian 4 platforms.
      Particularly the Symbian 4 platform is expected to be a significant improvement on the usability of Nokia’s high-end smartphones.
      In Windsor’s view, only a complete collapse of the Symbian operating system would force Nokia to choose Android.
      Even in that case, Nokia would have major problems, as its existing Ovi Maps application is not compatible with the Android platform.
      ”Nokia’s smartphone strategy is almost entirely based on Symbian. If Symbian collapses, Nokia might have to make all its smartphones to run on the MeeGo platform. The remotest alternative could be Android, but it would take at least a year before Android could be deployed with Nokia’s services”, Windsor notes.
     
According to the information technology research company Gartner, the smartphone market share of Symbian was 41 per cent during the second quarter of the current year. The corresponding figure for Android was 17 per cent.
      The significance of high-end smartphones is based on the fact that they generate considerably higher-level markups than the low-cost models that cost less than EUR 60.
      In order to generate the same gross profit as one smartphone with a price tag of more than EUR 400, the company has to sell well over ten low-cost models.
      The gross profit margin is calculated by deducting all acquisition and manufacturing costs from the turnover.
     
Nokia’s fundamental strengths include massive volumes, owing to which the company is able to use its efficient production and logistics systems to manufacture mobile phones at lower costs than any of its rivals in legal markets.
      Ben Wood stresses further that if Nokia were to change over to the Android operating system, the shift could lead to giving up this extremely important competitive edge.
     
At present Nokia is producing nearly all of its handsets in its own factories, while very many of its competitors are largely using subcontractors.
      Thanks to the Symbian platforms, Nokia has been able to expand its smartphone range in the low-end market, in which the company has stayed ahead of its competitors.
      Nokia, which has been hurting badly at the upper end of the market from the success of the Apple iPhone and RIM's Blackberry, is pinning a good deal of hope on the success of its new N8 model, which uses the Symbian 3 platform.


Previously in HS International Edition:
  Nokia´s distress is likely to last a while (18.6.2010)
  Nokia issues 2Q profit warning, leading to crisis of confidence among investors; weak sales in smartphones to blame (17.6.2010)

Links:
  Nokia N8 (Wikipedia)
  Symbian platform (Wikipedia)
  Nokia N8

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