Nokia Squares Up to Software Rivals by Buying Symbian and Moving to Open Source

Earlier this morning, Nokia announced it would buy the 52.1 percent of Symbian shares it doesn’t already hold, merge the company with its own S60 organisation and create the Symbian Foundation. This new entity will introduce an open-source licence model for the Symbian operating system and the S60, UIQ and MOAP platforms. The move’s a shrewd response to growing threats from other providers of mobile phone software.

Before today, Symbian was owned by Nokia, Ericsson, Sony Ericsson, Panasonic, Siemens and Samsung. The new entity will be steered by a board of 10 members: five from phone manufacturers (Nokia, LG, Motorola, Samsung and Sony Ericsson) and five from network operators and chip makers (AT&T, NTT DoCoMo, Vodafone, STMicroelectronics and Texas Instruments).

It was only a matter of time before Nokia bought out its five partners in Symbian. CCS Insight estimates Nokia paid out more than $250 million in Symbian licence fees last year, so it makes commercial sense to buy Symbian for about $410 million, rather than keep paying what is effectively a subsidy to the other shareholders.

But I think Nokia was more worried about the risk that Symbian’s structure would erode its competitive position. Over the last ten years, Symbian has grown into the dominant supplier of smartphone operating systems, but it’s being challenged by a variety of new contenders:

• The LiMo Foundation has strong support from network operators, which have been attracted by its governance model. Operators believe they have more opportunity to influence the direction of this open-source platform than with Symbian and its S60 and UIQ user interfaces.

• Apple has raised the bar from a technical perspective, and Symbian licensees need to respond quickly to its touch-screen user interface, high performance and easy-to-use development tools.

• Google has challenged the commercial model, stating that its Android platform has reduced the cost of software to “close to zero”.

Nokia will surely have considered buying Symbian and integrating it as a software platform alongside Series 30 and Series 40. Perhaps the fear of intervention by a monopoly regulator meant it favoured the creation of a stand-alone entity.

In my view, had Symbian been created today it’s likely that this is the sort of structure that would have been adopted anyway — particularly given the current trend toward open-source software platforms. Ironically, it might even make Microsoft’s Windows Mobile and Google’s Android look overly proprietary and dominated by a single player.

If Nokia’s new approach works it could be of great benefit to the Symbian platform. Wider input from network operators and chip manufacturers, as well as closer integration of the operating system and user interface should make it more stable and more attractive to operators, to developers and — let’s not forget — to consumers. Alternatively, governance by committee may see it slipping even further behind. That seems difficult to believe, given that Nokia knows how urgently it has to act.

The involvement of nine other companies on the foundation’s board offers an elegant way to keep other Symbian licensees committed to the platform. Sony Ericsson and Motorola need UIQ to continue in some guise to support current product road maps. NTT DoCoMo needs MOAP for the Japanese market.

But I still wonder what UIQ brings to the table, about UIQ’s long-term future and whether Sony Ericsson and Motorola made the right decision to back the platform when they did. Maybe its saving grace will be its touch-screen capabilities.

At this early stage, I have a couple of questions:

• Is it too late? It has taken a sharp increase in competition from Google, Apple and the LiMo Foundation to force this move. Perhaps Nokia should have done this after it bought Psion’s 31.1 percent stake back in July 2004. This would certainly have made LiMo a less attractive proposition and Sony Ericsson and Motorola would have been able to use their resources more effectively on a unified platform.

• Can the new entity really be open when Nokia has such a vested interest? This may be the stated goal, but in practice it might be more difficult to achieve. We’ll have to scrutinise the fine print of the intellectual property rights and articles of association.

The most obvious effect is that license fees for Symbian OS and S60 will disappear. That will benefit current licensees, make Symbian extremely attractive to new entrants and push it even more rapidly into mid-tier phones. I’ll be interested to see how competitors respond, especially Microsoft, Google and Qualcomm.

I can’t help thinking we haven’t reached the end of this story. We’ll have to see how events unfold over the next few days. In the longer term, perhaps there is some truth in the rumours that Nokia has a new Linux-based software platform on the blocks for high-end multimedia devices. It seems almost unthinkable that it would consider open-sourcing Symbian and S60 if it didn’t have something else up its sleeve.