Questions Remain in Wake of Microsoft/Nokia Partnership

Monday morning, Microsoft CEO Steve Ballmer will provide a keynote address at Mobile World Congress in Barcelona. And while the eyes of the wireless industry will be watching, in the wake of last week's partnership announcement with Nokia (in which the two companies will partner on Windows Phone), many questions still remain.

The first and most obvious is about the financial details of the partnership. At Friday's announcement, Nokia President and CEO Stephen Elop was asked about whether money was changing hands between the two companies, and though he basically dodged the question, the suggestion was that yes, money was moving in both directions. Elop noted that Windows Phone is a "royalty-bearing product," but he also said that Microsoft wasn't getting access to Nokia's various technology assets for free.

Later, Elop claimed the link-up would result in "very substantial reductions" in operating expenses, partly from coming layoffs but also because the company wouldn't need to funnel huge amounts of money into smartphone OS research and development. But under repeated questioning, Elop also finally admitted that Nokia hadn't gotten the worse end of the deal and would receive "billions" of dollars in financial support from Microsoft.

What about Android? Elop admitted at Friday's event that Nokia had also courted Google in the months leading up to its decision to back Windows Phone, but the company felt that Android was heading in the wrong direction, with "prices, profits, everything" being pushed down at a rapid rate as the Android platform commoditizes. "The ... value would be moved out to Google, essentially," he said.

He also noted that Google was very eager to snatch Nokia from Microsoft, noting that a Google/Nokia "duopoly" would have had a "decisive impact" for Android. "We're the swing factor," he said. "We can swing it to Android or swing the industry over to create a third ecosystem." Google has since downplayed the loss of Nokia publicly, of course.

One of the big unanswered questions concerns the timing of the first Nokia Windows Phone device. Elop noted that it would be 2012 before the company was pushing Windows Phone fully. And Elop never uttered the phrase "Windows Phone 7" on Friday, sticking instead with the vaguer "Windows Phone." This suggested to some that Nokia's first device would be based on Windows Phone 8, which will be based on desktop versions of Windows and not the current Windows Phone 7 platform. But the company later and briefly showed images of a prototype Nokia device, suggesting that the company would rush a Windows Phone 7-based device to market later this year. "My boss has told me he would be much happier if that time was in 2011," one Nokia representative said Friday.

And what about Zune? Although both companies talked up virtually all Windows Phone-based services, Zune was conspicuously missing—both in discussions from both Elop and Ballmer and on a global reach marketing slide that was created by both companies. My sources tell me that the Zune brand is on the way out and that all Zune products and services will be moved into other businesses, including Windows Live. Zune will essentially cease to exist under this plan.

Finally, those merger suggestions I lofted last week on the Windows Weekly podcast and in Short Takes don't appear to have been discussed at all. Elop says that such a thing was "never on the table" during talks between the two companies. Part of the reason is that a big part of Nokia's business is for low-end phones for emerging markets; these devices won't be running Windows Phone anytime soon, he said.

Perhaps some questions will be answered at today's keynote address, so stay tuned. And in the meantime, please check out my article, Nokia + Microsoft: An Analysis Of The Strategic Alliance, which examines the partnership as announced last Friday.

TAGS: Windows 8
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