Nokia CEO: Rejecting Android for WP7 creates three-horse OS race

BARCELONA, Spain--Roughly 48 hours after Nokia (NYSE:NOK) confirmed plans to ink a broad strategic partnership with Microsoft (NASDAQ:MSFT) that positions the software maker's fledgling Windows Phone 7 mobile operating system as its primary smartphone platform, Nokia CEO Stephen Elop took the stage here on the eve of Mobile World Congress 2011 to outline the thinking behind the handset manufacturer's decision, as well as to explain its rationale for favoring WP7 over Google's (NASDAQ:GOOG) Android. According to Elop, a Nokia/Google partnership would have transformed the mobile industry into a duopoly pitting Android against Apple's (NASDAQ:AAPL) rival iOS: "If we had made the decision to swing in the direction of Android, it would have delivered substantial market share, and would have tilted the mobile ecosystem in that direction," Elop said. "By partnering with Windows Phone 7, we've established a very different dynamic, and created an environment where Windows Phone 7 is a challenger. We've created a three-horse race."

Per terms of the deal announced last week, Nokia and Microsoft will forge a worldwide mobile ecosystem integrating their respective assets--for example, Microsoft's Bing engine will power search across Nokia devices and services, and Microsoft assets like Bing and AdCenter will incorporate the Nokia Maps solution. Microsoft software tools will enable developers to build apps that run across Nokia devices, leveraging the handset maker's global scale. Nokia also boasts extensive global operator billing partnerships, enabling developers to reach consumers in regions where credit card usage is negligible. "Microsoft is contributing services like search, advertising and Xbox," Elop said. "But they're also making a significant bet on Nokia for the delivery of location-based services... The value transfer to Nokia is measured in the B's, not in the M's. The thing to recognize is that Nokia has placed significant strategic value on Microsoft, and Microsoft has placed significant value on Nokia."

Nokia declined to state when it will introduce its first Windows Phone 7 smartphones to retail, but suggested devices will hit the market during 2011. In the interim, Nokia senior vice president Jo Harlow pledged to make "significant short-term investments in Symbian," with the operating system slated to power a series of new devices debuting over the months to come. Harlow also promised Symbian enhancements translating to improved graphics and processing speed, as well as a more accessible user interface. Nokia also maintains it will introduce a smartphone running MeeGo, the platform combining Nokia's former Maemo and Intel's former Moblin efforts; once slated to power all of Nokia's future high-end devices, MeeGo now becomes an open-source project, with an emphasis on longer-term market exploration of new devices, platforms and user experiences.

Elop said that Microsoft never entered negotiations to acquire Nokia. "We agreed the best approach is a deep partnership where each has strategic bets around the other," he explained. "The best answer for Nokia is an ecosystem with other players innovating. More than anything else, Windows Phone 7 must compete with Android and Apple. We're competing within the Windows Phone ecosystem, but our number one priority is competing with Android."

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