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Nokia cites risk of Microsoft's own smartphone

Finnish firm also says Microsoft could lose interest in Windows Phone, while tensions arise in Google-Samsung relationship too

By CAROLINE GABRIEL

Published: 11 March, 2013

READ MORE: Financial | Nokia | Handset | Windows Phone

Google and Microsoft are both trying to emulate Apple by creating a more unified hardware/software platform, but their release of own-branded devices was sure to create tensions with their operating system partners. In particular, trouble looms ahead for both suppliers with the respective market leaders on their platforms - Nokia for Windows Phone and Samsung for Android.

In an SEC filing last week, Nokia acknowledged the risk arising from a possible Microsoft launch of its own smartphone. It also lists other risks, including that Microsoft could sideline or even dump Windows Phone and rely entirely on Windows 8 - also following an emerging trend to converge mobile, PC and TV operating systems and applications bases. There is already considerable harmony between W8 and WP8, but the latter has been squeezed into a smaller corner than originally envisaged - for instance, it cannot run on larger screened devices like tablets, limiting the options for its OEMs.


Nokia's perception of the risks in its decision to throw its lot in with Microsoft has shifted in the past year. In its 2011 filing, it saw the chief threat being the impact of Windows Phone royalties on its profits, as it moves from royalty-free Symbian.

In its 2012 document, it says: "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."

It adds: "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."

Since unveiling the Surface tablet, designed to showcase what Microsoft regards as an optimal experience for the two strands of W8 - the ARM and touch-enabled Windows RT, and the x86-based W8 Pro - there has been an expectation that it will also design a handset. This would have less clear advantages for the software giant though - unlike tablets, the smartphone sector is full of entrenched vendors, and Microsoft would have to decide whether to support WP8, thus alienating key partners Nokia and HTC, or push Windows RT down to the small screen, effectively sidelining Windows Phone altogether.

Meanwhile, there is talk of new troubles ahead between Google and Samsung, as the Korean giant prepares to launch the Galaxy S4 handset this week. According to The Wall Street Journal, Samsung will assert its independence from Google with a user experience and content/apps base that diverges more clearly from the vanilla Android platform than before. Most suppliers are looking to differentiate themselves by customizing their Android UIs, but Samsung's moves are the most serious for Google's attempts to harmonize the user experience, because of its huge market share.

The WSJ report suggests that Samsung is also wielding that market share as a negotiating tool to demand more favors from Google, in terms of advertising revenue share or early access to Android updates.

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