by Anton Shilov
09/22/2010 | 02:05 PM
An outgoing high-ranking executive of Nokia said that usage of Google Android operating system would eventually reduce differentiation between manufacturers and phones, which would easily inspire price wars and dramatically reduce profit margins among makers of mobile phones.
Anssi Vanjoki, outgoing head of Nokia’s smartphone division, in an interview with the Financial Times compared mobile phone makers that adopt Google’s software to Finnish boys who “pee in their pants” for warmth in the winter: temporary relief is followed by an even worse predicament. By contrast, Nokia is funding development of MeeGo and Symbian operating systems, which gives its phones a deserved difference compared to competing products.
But it costs too lot for Nokia to keep everything in house: the company spends roughly 10% of its revenue on research and development (R&D), while companies like Apple spend about 3.5%. One of the options for Nokia is to adopt Google Android platform, cut the spending and concentrate on things like design. Unfortunately, there is a problem for Nokia, which Apple - the company that commands less than 1% of cell phones market as well as a fraction of PC market - simply does not have: it has to develop tens of models per year to serve over 30% of the market. As a result, large R&D budgets are compulsory for Nokia. The company has dropped several software projects in the recent years and started to install open-source applications.
The immediate problems of Nokia seem to be different than spending on MeeGo or Symbian. Traditionally Nokia has announced its products months before actual launch; it worked when the rivals were weak, but it does not work today, when companies like HTC or Samsung can offer very competitive products and Nokia's handsets simply get outdated before they reach the market. Moreover, as the biggest market player, Nokia cannot afford updating firmware of its phones constantly unlike other companies, who carry just a number of models.
Even though it costs a lot to develop an own operating system for mobile phones, loads of companies are doing it: HP continues to work on webOS, Samsung is developing Bada. Perhaps, designing of own operating system is better than relying on a third party and becoming a maker of commoditized devices based on a popular OS?