Nokia needs to jump on the Android bandwagon

Smartphones are wreaking havoc on the industry's historically stalwart handset maker--Nokia--and things could get worse as Apple extends deals with more carriers, competitors ramp up their Android offerings and new players like Dell enter the market.

Nokia, the world's largest handset maker, rattled Wall Street last week, reporting a $834 million loss in the third quarter, the handset maker's first quarterly net loss since it started reporting quarterly in 1996. The results were largely due to a writedown Nokia was forced to take on its Nokia Siemens Networks joint venture, though flagging smartphones sales also contributed to the dramatic decline.

A day later, Nokia shook up its management, shuffling around executives to head up various positions in its phones business.

Apple and Research In Motion are the two main companies that appear to be gaining the most at the expense of Nokia. According to estimates from UBS analyst Maynard Um, RIM will command 18 percent of the smartphone market in the third quarter, while Apple will enjoy 15 percent. Palm, LG and Samsung also are becoming serious contenders in the segment.

A host of manufacturers, including HTC, Dell, LG, Samsung and Motorola, are moving aggressively to capitalize on the Android platform--even Verizon Wireless announced a new partnership with Google that signals a series of Android handsets and applications. Research firm Gartner forecasts the OS will overtake Apple's iPhone in worldwide market share by 2012 and take a significant bite out of the Symbian market share.

Where does that leave Nokia? It may be the dominant manufacturer worldwide, but it has yet to extend its brand into the smartphone market, industry analyst Jeffrey Kagan noted recently. Moreover, Nokia has made little progress in the U.S. market, where it has historically struggled to gain footing. Nokia's N97 smartphone came to the U.S. market in June with little fanfare because it had no carrier partner and a $700 price tag. The vendor has made some inroads with AT&T with E-series devices and netbooks, but not significant volumes. As such, gaining relevance in the U.S. smartphone market will be significantly more difficult given its weak brand here.

Nokia continues to spend a tremendous amount of effort trying to appeal directly to end users through its marketing initiatives and through its own services and applications, known as Ovi. In fact, Nokia has touted Ovi as its recipe to dominating the smartphone market. But there is little evidence that the strategy is working.

Nokia has acknowledged that it needs to work closer with operators in the U.S. to gain a better market share, but it also should consider falling in line with its competitors and adopting the Android platform as a second OS platform. Nokia has declared that the now-free-to-license Symbian is its smartphone platform of choice. (It also released the N900 using Linux-based Maemo software, but it doesn't appear Nokia will be pushing that software on a widespread basis.)

Meanwhile, the majority of Nokia's competitors are coalescing around Android and at least one or two other platforms for smartphones. HTC, for instance, plans to support two platforms: Android and Windows Mobile. Even fellow Symbian supporter Sony Ericsson, which has its own struggles, is slated to release its own Android device soon, the Xperia X3.

With Verizon Wireless' newfound support of Google for Android devices, the opportunity is ripe for Nokia to create a relationship with the operator, especially on the LTE device side. Of course, adopting Android goes against Nokia's own desires of appealing directly to the end user with its own services and applications that it has invested heavily in. Indeed, adopting Android could mean Google Maps goes on Nokia phones instead of Nokia Maps, but perhaps Nokia needs to learn the same lesson many of its operator customers have learned: To gain market share, sometimes you need to give up control. --Lynnette

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