When software giant Microsoft released Surface tablet to compete with Apple‘s iPad, around that time we heard about a possible Microsoft Surface phone, a conceptual phone created by Jonas Daehnert based on Surface tablet design. Being a conceptual phone, there was no guarantee that whether or not this smartphone would ever be made. But mobile phone maker Nokia believes that Microsoft is planning to make a Surface phone as soon as possible. If that’s true, Nokia is surely going to fall into big trouble.
As required by law, Nokia regularly set out the risks that it sees to its business in filings to the SEC. In 2011 20F filing, Nokia stated the main threat was that it may not be able to “turn a profit” by moving from royalty-free “Symbian” to the royalty-laden “Windows Phone.” Despite having all risks, Nokia was going good. But the twist came when Nokia posted its 2012 20F filing, which was released last Thursday.
Nokia is now worried that Microsoft may be working on a smartphone of its own, or may even ditch Windows Phone entirely. Nokia said in 2012 20F filing, “Microsoft may act independently of us with respect to decisions and communications on that operating system which may have a negative effect on us. Moreover, if Microsoft reduces investment in that operating system or discontinues it, our smartphone strategy would be directly negatively affected by such acts.”
But why would Nokia say this now? Well, here’s an interesting flash back.
When Nokia CEO Stephen Elop came to know that Microsoft may build its own Windows Phone, he welcomed the idea. Elop said, “Microsoft may make strategic decisions or changes that may be detrimental to us. For example, in addition to the Surface tablet, Microsoft may broaden its strategy to sell other mobile devices under its own brand, including smartphones. This could lead Microsoft to focus more on their own devices and less on mobile devices of other manufacturers that operate on the Windows Phone platform, including Nokia.”
But if Elop had any idea that Microsoft would take his such complement seriously and this complement would affect his company a lot, I’m sure he would have not said that. Nokia now believes that after such welcome from its Elop, many other device manufacturers influenced Microsoft to build its own hardware, or even move away from the mobile game altogether, leaving Nokia stranded. So, keeping the vague theory in mind, Nokia mentioned in 2012 20F that its relation with Microsoft may turn into a “deteriorating relationship.”
On the other hand, we can’t let go Nokia’s assumption about Microsoft’s planning to make its own smartphone just like that. Because, Microsoft handed Nokia US$250 million for Windows Phone. Despite selling 4.4 million Lumia devices during Q4 2012, Nokia reported it had a great loss due to decline of Lumia sales. In addition, Nokia still has to pay Microsoft a whooping $650M in Windows Phone fees.
Such circumstances can naturally lead Microsoft to think to divert in other direction. Just imagine, what would be Nokia’s reaction when Microsoft announces its plan to make its own Surface smartphone? Do you think, Nokia should make a shift to Android? Do you think the disappointing sales of Windows Phone devices will lead to Microsoft giving up on the OS entirely? Share your thoughts with us in the comments section below.