Nokia Contingency Plan: RIM vs Google

By Jim Lundy

Nokia’s Chairman Risto Siilasmaa was on Finnish TV on June 28th talking about Nokia and Windows Phone 8. While on that show, he claimed that Nokia has a contingency plan should the next version of Windows Phone not meet expectations.

It isn’t a coincidence that Nokia is talking contingencies. They need to have a backup plan and that means having a different Operating System to put on their phones should Windows Phone 8 not get it done. In 2012, there are not that many choices left, mainly due to the fact that Nokia needs a vibrant Mobile Ecosystem and the OS is just part of the equation.

Nokia Options: RIM vs Android

One of the options for Nokia is buying part or all of  Research in Motion, which does have a very capable OS called QNX (Blackberry 10).  RIM also has a decent app store with lots of apps. Given that RIM has hired two banks to explore its options, we are assuming that Nokia is one of the suiters the banks are talking to. Nokia may be negotiating to have an option on buying RIM or at least part of it. However, the issue of buying RIM has to do with price it can pay and the timing of a deal. The longer Nokia waits, the worse things get for RIM and a lower price can be had. At the same time, the longer Nokia waits, the longer it takes to get a QNX based phone on the market.

The other option is to go the Google route and license Android. From a pure cash spend perspective, this is the least expensive option and it would allow Nokia to ship its devices at both low and high price points, since the Android OS margin is not what it is for Windows Phone. Yes, Microsoft does make royalties off of Google Android, but the issue is having phones that consumers want to buy. Android is the number one Smart Phone OS right now in world-wide volumes. Since anyone can license Android, we’re very confident that Nokia has it running their labs. Of course by going the Android route, that would blow-up its deal with Microsoft.

Nokia and Cash

While there are choices on a contingency plan, lack of cash may force Nokia’s hand.  As many have pointed out, Nokia also needs to conserve cash. One way to generate cash is to sell more phones. RIM’s new OS isn’t shipping yet and neither is Windows Phone 8. Android is shipping now.

So far, the winning formula for Nokia isn’t there. The Lumina 900, certainly a very capable device, is not the iPhone Killer they had hoped for. So, the next six months will be very interesting for both Nokia and for RIM. One thing is certain, Mobile Ecosystems are the key to success.

Editors Note: Be sure to check out our premium research, including our 86 page strategic report on Tablets and Mobile Ecosystems.

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