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The Nokia saga, continued

This Friday Nokia will hold a strategy and financial briefing in London, with major announcements about operating systems being expected. This will impact the mobile browser market, so it’s important to web developers. A bit of background is in order.

On 27 Janauary new Nokia CEO Stephen Elop had an earnings call, and from it emerged two interesting points:

1. Nokia’s market share is in a deep dive (read especially paragraph 2); it dropped to 28%, where a year ago it still was 39%.
2. Elop made comments that can be explained as heralding a major shift in OS strategy.

Later on Tomi Ahonen solved the market share mystery. It turns out that Nokia artificially propped up its market share from somewhere in 2009 to summer 2010 by offering Symbian phones for dump prices to the operators. While this strategy saved market share, it cut deeply into Nokia’s profits. Tomi assumes that when all this was discovered it caused the fall of OPK, who was replaced by Elop. The strategy was discontinued, and as a result Nokia’s market share is now evolving down to its natural state, while profits are on the rise.

Still, an apparently disastrous drop in market share is not what Nokia needs right now. Therefore it’s good that people concentrate on Elop’s mysterious pronunciamentos about the OS strategy Nokia will follow in the near future.

But what exactly was he saying? Elop’s remarks started off a new round of blog posts from the camp that thinks only Google and Apple matter, and the camp that thinks there are more players than just those two.

As an example of the first, telecoms.com asserts (without providing evidence) that MeeGo cannot compete with the other OSs in the high-end market, but is forced to admit later that a MeeGo-based strategy could work very well.

Ewan McLeod rejects this as a US-centric viewpoint; while an anonymous Russian blogger explains why Nokia is viewed so negatively by the US-based blogosphere.

Horace Dediu gives the most outspoken analysis:

1. There will be a multiple OS strategy
2. The US market will be the first to see a new non-Nokia OS. I would guess Windows Phone with AT&T.
3. Low end devices will remain with Symbian due to price considerations for the chipsets, components.
4. MeeGo will be phased out in phone products but development will continue for tablets.

Nobody doubts that Nokia pursues a multiple-OS strategy (it’s been doing that for years), and that low-end devices will remain Symbian-based. The other two points are the provocative ones. Ever since I read that post I mulled over whether he is right or not. More and more, I tend to think he isn’t.

In an update Dediu deconstructed Elop’s words, and he’s dead right that the missing US market share is a sore wound in Nokia’s side, and that Elop promised action in North America.

I can believe in a special strategy aimed at winning some market share in the US and making use of non-conventional assets (i.e. not Symbian). I cannot believe, however, that Nokia will simply discontinue MeeGo as a phone OS, though, or that it will adopt Windows Phone 7. If they did we’d have to wait another nine to twelve months before the US-centric Nokia is ready, and Nokia is in a hurry.

I do not believe that switching to another OS would help Nokia. I already blogged about this: Nokia’s basic OS strategy is sound, it’s the execution that’s severely flawed. MeeGo will make a good high-end OS, Symbian will be relegated to the lower end, and Nokia will be back in the race. The problem is that there’s still not a single MeeGo device on the market, although the first one is supposed to be revealed at MWC next week.

In addition, if Nokia were to go with Windows Phone 7 or Android it would give up its chance at vertical integration — the height of fashion in the mobile world right now — and it will become beholden to Microsoft or Google for a vital part of its infrastructure.

The Qt middleware layer that supposedly makes cross-platform apps possible would have to be ported to the new OS, because without it Nokia can’t even afford to keep its own app store on its devices. But how do you port Qt to Silverlight? Or will Nokia give up Qt entirely?

For all these reasons I strongly believe that it’s in Nokia’s best interest to keep its current global OS strategy. Anything else just does not make sense.

That doesn’t mean we can be certain Nokia will continue its strategy, though. After all, senior management might start to believe the camp that wants them to switch OSs. In that case all bets are off and Nokia might choose a strategy that is not in its best interest.

I don’t know what’s going to happen. That’s why I’ll monitor Friday’s briefing with trepidation.

And to spice things up a bit, yesterday the news broke that Nokia’s senior management is being revised. Several old-guard officers will be removed, among which the VP in charge of the US market, who never succesfully penetrated the US market.

The game is afoot.

Updates:

1. Finnish magazine YLE claims that the management shake-up will not be as large as expected: at most two senior executives will go.
2. Ewan McLeod gives the master list of 37 predictions of what Nokia’s going to announce on Friday.
3. It occurs to me only now that Nokia could have quietly started the development of a Windows Phone 7 (or Android) device months ago. So maybe my argument that a new OS would take too much time is not as solid as it seems.
4. And Ewan McLeod says his sources tell him that it’s going to be Windows Phone 7 after all.