In the wake of Google's unexpected $12.5 billion deal for Motorola Mobility's patent portfolio and the protections it offers against mobile industry competitors, ailing smartphone giant Nokia said that it made the right choice by not allying with the online giant. Wall Street agrees: It sent Nokia shares surging 17 percent in the wake of the Google announcement.
Last year, Nokia began an exploration of potential smartphone platform partners and eventually decided on Microsoft's Windows Phone over Android. It cited the Android market's fragmentation and Nokia's inability to innovate in that market as just one of dozens of non-differentiated partners, as its primary reasons for walking away from Google.
"[The Google/Motorola deal] further reinforces our belief that opportunities for the growth of Nokia's smartphone business will be greatest with Windows Phone," Nokia said in a public statement issued Monday. "This could prove to be a massive catalyst for the Windows Phone ecosystem."
Opinions are divided on that last count. Though it's possible that Google's special relationship with Motorola—which will be operated as a separate business—will dampen Android enthusiasm with other partners, that's not a given. And let's face it, Nokia's current relationship with Microsoft is very similar to the Motorola/Google relationship, aside from the fact that Nokia is literally, and not ostensibly, a separate company. That is, Nokia's future fortunes are just as tied to Microsoft's Windows Phone as Motorola's are to Google's Android.
Nokia also raised the issue of patents, which is of course at the center of Google's sudden purchase of Motorola. "With our respective intellectual property portfolios, Nokia and Microsoft are working together to build and nurture an innovative ecosystem that benefits consumers, operators, developers, and other device manufacturers," the company noted. In other words, both Nokia and Microsoft own crucial mobile industry patents. And the companies intend to see that others using this patented technology acquire the proper licenses.
Looking ahead, there are questions about where Google takes Android. Two of the more obvious theories are that Google will simply abandon or sell off the Motorola hardware business over time, since they were only after Motorola's patent portfolio and aren't at all interested in the high-maintenance but low financial yields offered by hardware manufacturing. This is, I believe, what Google is planning to do.
On the other hand, the longer Google retains Motorola, the more its other Android partners might feel slighted and seek alternatives. This will be especially true if any new Google/Motorola devices really take off in the marketplace and Google decides to rein in Android's openness and begin building proprietary features that appear only in Motorola devices. Should that happen, Google would strengthen Android but at the expense of its many partners, many of which would likely abandon the platform.
But Android is at least in a good place, with 43 percent of the smartphone market and rising. Nokia's market position is fading fast, and by this time next year, it could be officially in also-ran territory. If Nokia is going to be successful with Windows Phone, it has to get to market quickly and execute perfectly. And that's true no matter what Google does with Android.