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Open Source Nokia a Threat to Microsoft, Google?

Nokia and Symbian
Nokia's play to open source Symbian, the world's most popular mobile phone software, could not only advance the Finnish handset maker's portfolio strategy, but also may stymie efforts by Microsoft and Google to steal market share.

The global smartphone leader said yesterday it planned to spend $410 million to buy all of Symbian -- in which it already owns a large stake -- to create a new, royalty-free mobile software platform.

At the same time, it pledged to release Symbian's mobile OS to the open source community through a new organization it created called the Symbian Foundation. (The foundation will also release Nokia's (NYSE: NOK) S60, a five-year-old Symbian-based platform designed for its higher-end handsets.)

News of the open sourcing of the world's leading mobile platform sent shockwaves through the fiercely competitive mobile services space, where carriers and handset manufacturers are increasingly looking to software features to set them apart from the competition.

This month alone saw the arrival of the next generation of Apple's popular iPhone, while the market is also bracing for further upheaval: Internet heavyweight Google (NASDAQ: GOOG) is widely expected to release its open source mobile OS, Android, during the second half of the year, while efforts to promote mobile Linux by the LiMo Foundation continue to gain traction.

"It's no longer about making devices sleek but making them sing and dance," Carmi Levy, senior vice president for strategic consulting at AR Communications, told InternetNews.com.

It's all about the software

As a result, industry observers see Nokia's gambit as an effort to shore up its software -- it relies principally on Symbian-based OSes like S60 -- against handset rivals using Microsoft software, while insulating itself from new, and potentially fast-moving competitors like Google.

"This move from Nokia makes enormous sense both from an offensive and defensive position," telecom analyst Jeff Kagan told InternetNews.com. "They want to lead, but they also don't want to follow."

Nokia for some time has been signaling its interest in using open source to add new features to the software on its handsets. In January, the company spent $150 million to snap up open source software vendor Trolltech, giving it control of the firm's Qtopia mobile application development framework. The technology had earlier found success in products from Nokia rivals including Motorola (NYSE: MOT).

Nokia has also looked into ways to bridge the divide between its S60 Symbian variant and Linux.

For Nokia, taking the lead on a major open source effort also represents an opportunity for deeper U.S. market penetration. While it dominates in Europe -- thanks to its handsets' support for GSM, the primary European network system -- it has thus far failed to gain similar levels of traction in the U.S., where the rival CDMA system reigns.

That may change as a new generation of high-speed, data- and application-friendly mobile networks arrive on the scene. With Long-Term Evolution and WiMAX laying the groundwork for richer application experiences, Nokia is positioning itself to take advantage of the trend by making it easier for developers to build on its platforms.

"This gives up a real opportunity to use Symbian to provide a richer product ecosystem," Lee Williams, senior vice president for S60 software at Nokia, told InternetNews.com.

Microsoft, Google face a new open source rival

Meanwhile, for rivals looking to unseat either Nokia or Symbian, the news may mean tough times ahead.

According to first-quarter figures from Canalys Research, Symbian holds 58.7 percent of the worldwide OS smartphone market. Microsoft (NASDAQ: MSFT) platforms share second place with Research in Motion's (NASDAQ: RIMM) proprietary BlackBerry device OS, each controlling 13.7 percent of the market. Linux holds 5.7 percent while Apple makes up 5.4 percent.

[cob:Pull_Quote]Microsoft in particular has been striving to increase its position in the mobile space, making enhancements to Windows Mobile and even providing services to Research in Motion's (RIM) BlackBerry. The Redmond, Wash. software colossus has high hopes for its growth, with an executive telling Reuters last month that the company expects to have nearly doubled sales of Windows Mobile during the fiscal year ending in June, and while also anticipating annual sales growth of at least 50 percent during the next two years.

But pundits now see a potential snag in Microsoft's plans, with Nokia's maneuver forcing proprietary players like it to change their pricing strategy, given the lower costs likely to be associated with a royalty-free, open source Symbian.

"It may be difficult for Microsoft to continue to justify its relatively high license fees for an OS that competes with a fully featured one that is offered for free," Jack Gold, founder and principal analyst, J.Gold Associates, told InternetNews.com.

While Gold doesn't expect Windows Mobile to disappear, he does believe Microsoft will have to be much more competitive in pricing if it wants to remain a major player.

"It will have to make its revenues on applications and services instead," he said.

Page 2: Microsoft and Google respond