At Mobile World Congress this week, Nokia announced the first three models of its new Android product line, Nokia X. Nokia X is positioned as entry-level smartphones below the Lumia range that nonetheless deliver a more complete smartphone experience with Android application availability than the Asha range. With both 4-inch and 5-inch screen models, the Nokia Store and Microsoft services will also be available on these devices; Bing Search, Outlook, OneDrive, and Skype will come preloaded. Although I am disappointed with the super-old Qualcomm MSM8225 chipset used, it brings high-quality Nokia products to the Android world at only €89 to €109 before tax and operator subsidies. 

It was not surprising that Nokia started trialing Android models before the Microsoft deal. However, it is interesting to see that Nokia is now not only launching it just to prove to the public that it has tried to do so, but also that it wants to make it a serious strategy. What does this mean when we are expecting the Microsoft acquisition to complete in just merely a month? And why did Microsoft approve it? Some possible reasons why:

  • Microsoft can’t yet deliver a good Windows Phone experience at the low price points they want to hit. Now it can — by using Android and old, low-cost chipsets.
  • The battle is not about getting people on the OS; it’s really about getting and keeping customers on the “digital platform” (the Microsoft account) and keeping them on Office. My colleague James McQuivey explained digital platforms (the online service platform/experience of Google, Apple, Microsoft, Amazon, and Facebook) in the Digital Disruption book, mentioned it in a recent report, and has a report in production about to hit website all about the digital platforms. 
  • In these circumstances, shipping a “proprietary branded Android” phone (non-Google services on the open source version of Android) make a lot of sense. See my colleague Frank Gillett’s Windows: The Next Five Years report for an explanation of the term “proprietary branded Android.”
  • Nokia’s move dramatically expands the reach of Microsoft’s digital platform to reach a wider audience with the Microsoft account than it can reach with Lumia alone — a very smart move. 
  • Additionally, this is expected to help Microsoft streamline Nokia mobile phone families to two series of smartphone brands only:
    • Nokia currently has three major product families: Nokia, Nokia Asha, and Lumia. Both Nokia and Nokia Asha are based on Nokia’s original Symbian OS, targeting emerging markets at a low or very low cost. With the Android smartphones pitching a similar price range, this part of the business becomes a challenging and unrelated business for Microsoft. 
    • The launch of Nokia X family will help Microsoft diminish the Nokia and Nokia Asha families in the next couple of years and create its own mobile phone business with pure smartphone offerings. 

For Nokia and Microsoft, beyond more competitive products in the lower end of the smartphone market, this is a smart move to create a direct customer relationship through Nokia and Microsoft services and apps. However, this will put increasing pressure on Microsoft to deliver more differentiated experiences on Windows smartphones. It has to gain significant market share in 2014 to reach a critical mass audience that will naturally foster the development of the ecosystem. It’s disappointing that no new Lumia devices were announced today.

Who will be affected by the Nokia X launch?

  • Samsung. Its low-end Android models will be the primary target of Nokia X. Nokia X has better industry design, cover material, a larger screen, and very attractive lower pricing. It will break Samsung’s current product strategy.
  • Low-end Chinese brands and white-label Android device makers. These players will be heavily affected by Nokia X. With Microsoft services preloaded, Nokia Store available with billing support from more than 160 operators, and its Live Tiles-like UI design, Nokia X devices might be a better entry-level smartphone device for many consumers in emerging markets.