Preston Gralla

Nokia CEO's "burning platform" memo lends more weight to a Microsoft-Nokia Windows Phone 7 deal

February 09, 2011 11:50 AM EST
Nokia CEO Stephen Elop has written a surprisingly blunt so-called "burning platform" memo in which he lays out the serious woes Nokia faces. In it, there are plenty of hints that in two days, a Microsoft-Nokia deal will be announced in which Windows Phone 7 will be used for Nokia phones.

Endgadet published the memo. In it, Elop begins the memo with a story about a man standing on a burning oil platform, who has to make a decision about whether to jump 30 meters into the freezing waters of the North Sea to escape the fire, or stand on the platform and be consumed by fire. The man jumps, doing something he would not do in ordinary circumstances, in order to save himself. In doing so, he also changes his outlook about the necessity for change.

In the memo, Elop says:

We too, are standing on a "burning platform," and we must decide how we are going to change our behaviour.
Elop doesn't say what that change will be, but there's plenty of evidence that it could be the rumored deal with Microsoft.

In the memo, he spells out how the iPhone and Android became raging successes while at Nokia "We fell behind, we missed big trends, and we lost time."

He then leaves some very big hints that Nokia may abandon development of its high-end operating system for smartphones, MeeGo, and possibly even its workhorse operating system for mid-range phones, Symbian. Here's what the memo says:

We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.

At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America. Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.
That sounds as if Elop has decided to abandon MeeGo -- Nokia clearly can't succeed if it can only have a single MeeGo product in all of 2011. And even more radical, it sounds as if he may decide to abandon Symbian as well. Calling Symbian "an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements" is far from a ringing endorsement. Elop

Based on all this, it appeas that Nokia will look to a new platform for high-end and mid-range phones. That leaves the choice of Android or Windows Phone 7. I'd bet against Android because Elop made clear in his memo that he's looking for a way to differentiate Nokia from the competition -- and at this point, Nokia Android phones would be nothing more than me-too devices.

In addition, Carolina Milanesi, research vice president at Gartner, told the IDG News Service that a deal with Microsoft makes more sense than one with Google from a services perspective.

Microsoft would be a big winner in such a deal, because it could jump-start the struggling Windows Phone 7 operating system. The IDG News Service quotes Pete Cunningham, principal analyst at Canalys saying "It is in Microsoft's interest to attract Nokia, because it is the largest vendor in the world," and then adding that Nokia has "a fantastic distribution and channel network, and great production capacity."

So Microsoft would certainly welcome such a partnership. Of course, I'm not sure that Microsoft is particularly pleased about having Windows Phone 7 likened to someone jumping 30 meters to a possible death in the frozen seas of the North Atlantic. But you've got to start somewhere.

Elop is expected to make an announcement about a Nokia reorganization and possible deal with Microsoft on February 11 in London.