Nokia Throws Open Mobile Software

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That's where Symbian comes in: Today it's used mostly for top-of-the-line devices, but Nokia and others want to see it move down into mass-market products (known in industry jargon as "feature phones").

Today, such phones tend to use inflexible, homegrown software that's nightmarishly hard for handset makers and mobile operators to modify, limiting the opportunity for economies of scale possible if phones from many makers shared common software. Closed systems also make life more difficult for operators and suppliers of mobile software and services.

Symbian has been scrambling to move its software onto less expensive midrange devices of the sort now powered mostly by proprietary operating systems. But it will have to compete against newcomers like Android, an initiative backed by Google, which seeks to create a Web-friendly software platform, based on open-source software, for midrange phones. Reports emerged on June 23 that Android may be delayed until early 2009 due to technical challenges, but nobody is dismissing its potential to shake up the industry.

"A Shrewd Response"

In the meantime, a Linux initiative called the LiMO Foundation, which has the backing of big mobile operators including Vodafone and Verizon Wireless (VZ), has been gaining traction in the marketplace (BusinessWeek.com, 5/14/08). Some 50 operators and handset and chip makers have signed up, and 16 handsets using the LiMO operating system are already on the market. Additional partners and up to 10 more handsets are expected to be announced in July, says Morgan Gillis, the LiMO Foundation's executive director.

Then there are the computer industry players. Apple has raised the bar for all other handsets with its revolutionary user interface and ease of use, while Microsoft, which has a slowly growing presence in smartphones for business use, has made no secret of its own ambitions to move into mass-market consumer phones. BlackBerry maker Research in Motion (RIMM) also is trying to move beyond business-oriented devices into the consumer market.

Nokia's June 24 move "is a shrewd response" to these growing threats, says Geoff Blaber, an analyst with British mobile consultancy CCS Insight. By opening up Symbian to the industry and making it free, the software will become more robust and widely used. The deal also could knock the stuffing out of rivals such as Microsoft who continue to charge royalties for the use of their software. According to Nomura Securities analyst Richard Windsor, Symbian's shift to an open-source licensing model could cause "severe pricing pressure on those who develop mobile software for profit."

Spreading Bets

The deal also makes financial sense for Nokia, analysts say. Nokia had been paying significant licensing fees to Symbian—more than $250 million last year alone, CCS Insight estimates. Better instead to spend $410 million to buy out Symbian, rather than keep paying what was effectively a subsidy to the company's other shareholders. All told, says brokerage Dresdner Kleinwort (KWFTF) in a research note, the deal should help Nokia compete better against Apple, RIM, and Linux- and Windows-based smartphones.

To be sure, some important questions remain. Among the largest, points out CCS Insight's Blaber: Can the new Symbian Foundation really be open and independent when Nokia has such a vested interest in its software? That's one reason so many big players in the mobile and tech industries continue to spread their bets.

Case in point: Representatives of both Motorola and Japanese telco NTT DoCoMo supported Nokia in London on June 24 and will serve on the board of the new Symbian Foundation. Yet both companies also are involved in the LiMO Foundation and are also taking part in the Android initiative.

In the end, it's unlikely any one operating system will prevail in handsets, as happened with Windows on personal computers. And for all its efforts to remain in the lead, Symbian could stumble if the rival initiatives do a better job of recruiting handset makers, independent software developers, service providers—and end users.

"This is a difficult industry," says Colly Myers, a former CEO of Symbian. "Part of it is technology; part of it is fashion; and part of it is consumer." As with anything tied to trends, he notes, "today's hero is tomorrow's fallen idol."

With Mark Scott in London.

Schenker is a BusinessWeek correspondent in Paris.