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Friday, September 13, 2013

Behind Microsoft Deal, the Specter of a Nokia Android Phone

SEATTLE â€" Before Microsoft reached a deal to buy Nokia’s phone business, there was a possibility that Nokia could have switched its smartphones to Google’s Android operating system sometime after late 2014.

And now, it is clear that a Nokia Android phone was more than a possibility. It was real.

A team within Nokia had Android up and running on the company’s Lumia handsets well before Microsoft and Nokia began negotiating Microsoft’s $7.2 billion acquisition of Nokia’s mobile phone and services business, according to two people briefed on the effort who declined to be identified because the project was confidential. Microsoft executives were aware of the existence of the project, these people said.

Another person said the idea of Nokia using Android wasn’t a part of Microsoft’s discussions with the company about an acquisition, even though that was widely recognized as a possibility.

On one level, Nokia’s Android effort is not shocking. Companies often have “plan Bs” in the works in case they need to change course on strategy or want to help negotiate better terms with partners. Getting Android to run on Nokia’s hardware was not a Herculean engineering effort, according to the people familiar with the project.

Still, a functioning Nokia Android phone could have served as a powerful prop in Nokia’s dealings with Microsoft, a tangible reminder that Nokia could move away from Microsoft’s Windows Phone software and use the Android operating system, which powers more than three out of every four smartphones sold globally.

Susan Sheehan, a spokeswoman for Nokia, declined to comment, as did Frank Shaw, a Microsoft spokesman.

Nokia reached a deal with Microsoft in 2011 to use Windows Phone on its smartphones, but Nokia had an option to exit that partnership at the end of 2014. Unraveling that deal would have been painful for both parties. It would have been devastating to Microsoft’s mobile phone efforts since Nokia accounts for more than 80 percent of the Windows Phone handsets sold. For Nokia, changing such an important ingredient in its products would have been a costly setback too.

Nokia has faced criticism that it made the wrong decision in choosing Windows Phone over Android several years ago. Nokia’s share of the smartphone market fell to 3 percent during the first half of 2013, from 32.8 percent in 2010.

There is no telling for sure whether Nokia would have been better off with Android over that time. It is possible the design of the operating system and greater abundance of Android apps might have put Nokia in a better spot.

The current status of Nokia’s Android project is unclear. Presumably, after Microsoft completes its acquisition of Nokia’s phone business early next year, there won’t be much future for it.