Nokia-Symbian Pressures Apple, Microsoft, RIM

Nokia may have just switched the balance of power from proprietary to open-source mobile phone software by buying the remainder of the Symbian operating system software concern and spinning out the assets under an open-source license.

This move, in which Nokia paid $410 million to buy the 52 percent of Symbian it didn't already own and set up the Symbian Foundation as a new open-source entity through which to offer the operating system, is a survivalist's calculation to thwart growing threats from proprietary and open-source vendors alike.

With 40 percent of the world's mobile phones coming from the Finnish phone maker, Nokia is not under threat today or even tomorrow.

But the reality is that while Nokia rules the mobile phone roost overseas, it has yet to make a dent in North America compared with Apple's iPhone, the tenacious Microsoft Windows Mobile platform and Research In Motion's BlackBerry gadgets.

Is that where the next battlefield is? By its actions, Nokia seems to think yes, or at least it wants to keep those vendors from extending their tendrils too far into the European and global markets, while moving in lockstep with open-source platforms from Google's Android and the open-source LiMo Foundation.

The 451 Group's Tony Rizzo wrote in a June 24 research note that Nokia has not been able to cash in on Symbian's mobile operating system development in North America and could not risk the possibility that the open-source model would eventually intrude in the numerous global regions where the Nokia now dominates.

So Nokia joins the open-source crowd, a group that would claim to be the lesser of two evils.

But the mobile open-source world is still young and there is too much fragmentation. The Android effort has yet to produce an actual phone users can access. LiMo and the Open Handset Alliance that supports Android are warily circling each other. The LiPS (Linux Phone Standards) Forum just joined LiMo.

There is a lot yet to be sussed out here and Nokia just added more fragmentation to the mix.

However, having Nokia on the open-source side could give that effort more weight against Apple, RIM and Microsoft. Rizzo agrees:

By taking away the open-source argument from several groups that are collectively fragmented, and replacing it with an open-source model and argument based on a rock-solid OS, Nokia (or rather the Symbian Foundation) will change the mobile OS landscape globally—and perhaps over time this may even allow Nokia to gain a larger place in North America.

He added that the cost-effective nature of mobile Linux platforms for device makers and wireless operators "weighed heavily on Nokia."

One of the benefits to Nokia of buying Symbian is that Nokia has perpetually paid that company licensing fees for the 200 million Symbian-based phones it has sold, which in turn led the phone maker to pass along those costs to carriers, Rizzo noted. Not anymore.

ABI Research Vice President Stuart Carlaw agreed, noting that there has been financial pressure on Nokia to move in this direction. "The sheer economics of the number of devices it ships with the OS versus the value it gets out of its historic shareholding clearly indicated that such a 'rescue' was inevitable," he said.

Now, the slate gets wiped clean. Nokia will sell open-source smart phones, Internet services and advertising at a far lesser cost. With Symbian, Nokia owns the complete open-source platform: hardware, software and services.

Now that Nokia has unified its offerings, it will need to bear down on its Internet services portfolio, where it lags behind Google, Yahoo and others.

Nokia may have the advantage of owning a soup-to-nuts mobile platform, but if it doesn't move fast enough, Google will grab the bulk of that online advertising market, which IDC predicted will reach $106 billion by 2011.