Will Nokia's new Android phones lead to a civil war inside Microsoft?

Nokia's new X line of low-end Android phone looks like it could be a winner -- but its success could set off a serious civil war inside Microsoft. What do the new Android phones say about what kind of company Microsoft will eventually become?

Nokia announced three Android phones at the 2014 Mobile World Congress, the X, X+ and XL. All phones come with a Qualcomm 1GHz dual-core processor and can use dual SIM cards, a requirement in developing countries, the target for the new inexpensive phones. The highest-end phone of the three, the XL, sports a 5-inch screen with 800 by 480 pixel resolution, a 5-megapixel camera and a 2-megapixel front-facing camera. It has 768MB of RAM and 4GB of integrated storage. The X and X+ have smaller 4-inch screens with 800 by 480 pixel resolution and a 3-megapixel camera. They have 4GB of storage, The X has 512MB of RAM and the X+ has 768MB of RAM and a microSD card slot.

In the developed world, the specs are unimpressive, but in the developing world, they're right on target because the phones can be sold cheaply. The Nokia X is on sale now in Asia-Pacific, Europe, India, Latin America, the Middle East and Africa, and is priced at 89 euros, (US$120). The Nokia X+ and Nokia XL will ship to the same areas of the world at the beginning of the second quarter, and will cost slightly more -- 99 euros for the X+ and 109 euros for the XL.

The phones may be Android-based, but other than that, they'll carry a Microsoft heritage. The interface looks like much like Windows Phone, rather than Android. More important, their services will be Microsoft ones, not Google's. So they come with Skype, with Outlook.com rather than Gmail, Bing rather than Google search, OneDrive rather than Google Drive, and Nokia's Here maps rather than Google Maps. Apps won't be able to be downloaded from Google Play, but instead from a Nokia app store.

Windows Phone can't run on inexpensive hardware, so Nokia's move is an attempt to gain back market share in the developing world, where it once ruled. The idea behind the Android phones is two fold: One, get people to use Microsoft services such as Bing and Outlook.com, and two, turn the the low-cost Android phones into a kind of on-ramp for Windows Phone handsets. Once users of the phones move up the economic ladder, they'll be able to afford more expensive phones, and if they're already hooked on Microsoft services and used to a Windows Phone-like interface, Nokia will try to get them to buy Windows Phone handsets.

It's a clever solution for a serious Microsoft problem -- Windows Phone can't gain share in developing markets because it can't run on low-end devices.

But if it succeeds, it could also lead to a civil war inside Microsoft. Microsoft has said that it's working on Windows Phone so that it will be able to run on low-end devices. Those devices will target the same market in the developing world as Nokia's Android phones. CCS Insight's head of research Ben Wood told Reuters:

"Our view is they will try to push Windows Phone down into that space as quickly as possible."

But what happens if the low-end line Android line sells so well that it cannibalizes low-end Windows Phones? Will those who work for Windows Phone push to kill off Nokia's Android line?

And what about a possible Nokia push to develop higher-end Android phones? Microsoft has said that it's in the services and devices business, not the software business. If that's the case, what should it matter what software their devices use, as long as they deliver Microsoft services? If Skype, Outlook.com, OneDrive and Bing Search are bringing in enough revenue on Android phones, there could well be a push by some inside the company to let Android and Windows Phone co-exist at many price points, not just at the low end.

The move to sell Android phones highlights a deep divide in Microsoft's core mission. Is it truly now a devices and services company as it claims,or is that just lip service? If it were truly a devices and services company, it would embrace Android phones at many price points as long as they all carry Microsoft services. And if it were truly a devices and services company, it would let its Office 365 subscription service to run software on iPads and Android tablets, not just on Windows devices.

In both cases, it's not clear yet what Microsoft will do. But how Microsoft handles Nokia's Android phone line will tell us a great deal about what kind of company Microsoft will eventually become.

Copyright © 2014 IDG Communications, Inc.

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