Were Nokia and Symbian always inter-dependent?

Several readers pointed out that in my discussion on the market share of modular vs. inter-dependent market shares for smartphones, Nokia was incorrectly classified as having an inter-dependent software architecture since the Symbian platform is/was a modular component.

The problem is that the relationship between Symbian and Nokia is not that of independent modules. Nominally, the two are independent and mutually exclusive, but, in practice, Symbian has always been so heavily dependent and influenced by Nokia that it’s never been possible to declare its governance fully independent.

I won’t describe the full history since there are many other sources (good example here.) But I will point out that since Nokia licensed Symbian exclusively and Symbian obtained the vast bulk of license fees from Nokia, the relationship was one similar to a bilateral monopoly.

Nokia’s bargaining power over Symbian was always high enough to affect its operations. “Ownership” does not only infer a formal control over equity, and many would agree that Nokia “owned” Symbian even when it held less than 50% of the equity. The relationship was so tight, that even though there were other members of the consortium with board seats, the licensing by Nokia’s competitors was always very limited. The only significant non-Nokia revenue for Symbian came from Japan where Nokia did not have a presence.

After Symbian was effectively acquired by Nokia, the ownership became both de jure and de facto. The open sourcing of the Symbian code made it no less a Nokia operation than the open sourcing of Android makes it no less a Google operation.

So for all intents and purposes, the relationship between Symbian and Nokia makes Nokia’s smartphone hardware inter-dependent on Symbian’s software.

Now, given that the way the products are built in practice may be far from integrated, it would seem that Nokia’s management captured the worst of both worlds: Modular implementation of an inter-dependent business. Nokia captured all the downside of modularity (poor integration and polish) without any of the benefits (e.g. flexible supply chain or lower R&D.)

  • gctwnl

    Horace, what is your take on Microsoft in this respect? In the MP3 segment PlayForSure was modular and failed miserably, the Zune was interdependent (but still failed to unseat iPod). Now we have Windows Phone 7. It is modular (it is used by different handset makers), even if it has Zune roots and integration with other Microsoft services. I have been wondering, how does Microsoft wan to make serious money from Windows Phone 7? They can't charge too much as Android is free. They don't sell hardware. The only way this could be worthwhile seems to be with massive volume as in the PC segment. They could build on the Exchange+ stronghold in business, but instead make a phone that is definitely 'consumerish'. Am I confused or are they confused?

    • asymco

      Microsoft did a courageous thing with WP7. They hit a reset on a platform and "fired" their ecosystem. They observed that the pure modular approach was not going to work and copied some of the Apple playbook. They learned.

      However, it's not enough. Fundamentally, they cannot compete directly with iPhone and RIM and Nokia and can only compete with Android by "bribing" the value chain. Strategically they are sticking to the licensing model and are therefore positioning themselves for some late-in-the-future world where licensing an OS might make sense as a business. That makes it a strategy that is about staying in the game rather than winning.

      Knowing Microsoft, I believe they will stay in the game, mostly by buying their way in. But it's a plan that destroys shareholder value. That makes it vulnerable to cancellation if/when management changes.

      • dms

        One thing that I don't quite get about WP7 is it's heavy consumer focus.

        Apple's assets are all in the consumer space (iLife, iPod, iTunes, etc.), and the iPhone's ecosystem reflects that. Google's assets are in search and cloud services and Android is most appealing in those aspects.

        Similarly, one would expect that Microsoft would leverage it's assets in Office and enterprise. I know their previous mobile efforts were centered around enterprise and it failed in the market. But I say that's because of bad execution, not because of their strategy.

        I know the Android market share is ripe for picking (because of it's modular nature), but shouldn't RIM's markets hare also be a major target for Microsoft? Any thoughts?

      • Steko

        There's only so many phones sold to corporate. It's not the desktop market where 2/3 of units shipped are to businesses. Basically if you only go after the corporate market you're surrendering 80% of the pie.

        Microsoft, more then anyone, looks like they've learned some lessons from Apple. Their interface is the only one that doesn't scream "iphone knock off", they're keeping the carriers hands off the OS for now and they're the only ones going gung ho on their own retail outlets.

  • Rather than dwell on what has gone on in the past though as it's not really that relevant, what's your thoughts on Nokia now?

    There were a bunch of announcements out of SEE 2010 today for instance inc 50+ changes coming to Symbian in the new year and a new SDK release. IMHO, Nokia have been implementing well in the weeks following Elop's appointment.

    • asymco

      I find it hard to analyze Nokia because I know them too well. The problem is separating the political and organizational dysfunction from the strategy and underlying opportunity they could have. Operationally, the company is in crisis mode and that's not a bad thing. Motorola had its near death experience and perhaps Nokia needs to hasten toward one of its own. It may bring clarity of focus and boldness. But there are so many moving pieces that it's hard to make any forecast with confidence. To your point, I don't see Elop having effect for many months to come. There have been zero appointments or changes in management. This indicates that he's taking stock of the situation and is still absorbing the situation. It's a good thing perhaps but it's also a sign that he's not been hired to slash and burn.

  • TimH

    Horace- I find your "I find it hard to analyze Nokia because I know them too well." both exceptionally refreshing, and thoughtful as well. If anyone is capable of commenting on Nokia, it is you, but simultaneously you seem also understandably humbled, by the prospect of providing opinions that might be unduly influenced by your past associations. That speaks volumes about you as an honest analyst. I really enjoy visiting your site regularly. Keep up the good work!

  • Jake

    The problem of Nokia is "slow death". Its hard to believe you're dying when you're still shipping well over 20 million smartphones per quarter. What was Symbian's last figure, nearly 29 million? You can't afford a clean reset because you still have a huge user base.