The battle between Nokia and Microsoft to dominate the mobile operating system was thrown into sharp relief this week as both upgraded their software platforms. And LG Electronics - currently the dynamic player among the handset top five - licensed both systems.
But if the best way for Symbian OS to fend off the challenge from Windows Mobile is to have a strong, unified direction, it took a step backwards this week, when Ericsson and Sony decided to increase their stakes in the Symbian consortium, to rob Nokia of the controlling stake it had sought.
Ericsson challenges Nokia control
Psion had agreed to sell its shares to Nokia, which would have increased the Finnish giant's holding from 31.1 per cent to 63.3 per cent, but now Ericsson CEO Carl-Henric Svanberg has urged the other shareholders to exercise their rights to buy the Psion shares in proportion to their current holding. Ericsson and its joint venture with Sony will increased their combined share in Symbian from 19 per cent to just over 27 per cent and Svanberg has called on Siemens, Samsung and Panasonic to take similar action.
If they all comply, Nokia's stake will be 46.7 per cent. If only Ericsson and Sony make the move, it will hold 54.7 per cent. Therefore, it is important to Ericsson that at least one other shareholder follows its lead, since otherwise it appears to get the worst of both worlds - splashing out £37m for an extra 8.6 per cent but still falling 2.4 per cent short of the 30 per cent it would need to block major changes, and with Nokia still holding over half the shares.
Samsung and Siemens have both said they will not seek to increase their stakes, leaving Panasonic as Ericsson's only hope. The Matsushita unit has said that it does not believe Nokia should have control and had not expected one player to gain dominance when its made its investment in Symbian. However, it has not yet decided whether to back up those words with further cash. (It is worth noting that, under the Symbian charter, major changes have to be sanctioned by the holders of 70 per cent of the shares, so Nokia's control will not, in any event, be unchallengeable).
Nokia's holding must be kept below 50 per cent, Svanberg said this week, or Symbian "becomes a Nokia platform. If that happens there will be a gradual deterioration in the view of Symbian". Svanberg says that, if Symbian OS is no longer seen as independent, phonemakers will turn to Windows, PalmOS or Linux. However, these pronouncements are likely to mask an agenda more specific to Ericsson and it is by no means certain that the other shareholders will share Svanberg's concerns.
Ericsson is the only Symbian partner apart from Nokia that has put serious investment into R&D around the platform and the body has often looked like a software developer for the two Scandinavian companies. Ericsson doubtless wants to preserve this situation and its investment to date in its own user interface and development environments. It has also - unlike a company like Samsung, which has a multiple operating system strategy - put all its smartphone eggs into the one basket, so that it is, indeed, putting its future into the hands of its greatest rival should Nokia rule Symbian.
Handset makers happy to license?
But the other players have a different approach. They license Nokia's Series 60 developer environment rather than creating their own and, in many cases, also license alternative OSes. They know that, in reality, Nokia's stranglehold on the technology was already in before the Psion sale - it is by far the largest customer, driving about 85 per cent of Symbian handset sales to date; it is the most single-mindedly committed vendor (along with Sony Ericsson), which translated to a huge pile of marketing and influence dollars; and most crucially, it has Series 60 and its variants, the user interface and development environment that entirely dominate the Symbian platform.
If Samsung, Siemens, LG and others are happy to license Series 60, then why not the OS? All the shareholders bar Sony Ericsson have plenty of funds to have developed their own implementations and have instead used Series 60. Samsung grows increasingly close to Nokia in co-operating to develop new markets.
This reminds us that these companies do not necessarily want to control the OS. They want a platform that enables them to bring differentiated handsets to market as quickly and easily as possible - the main appeal of Symbian. They do not necessarily want to fund development of that operating system.
Equal ownership and control of the evolution of the smartphone OS was a nice dream for the handset makers, but it became unachievable as soon as Motorola left the consortium last year, leaving no real counterweight, in shareholding terms, to Nokia. Therefore we think it likely that Ericsson will not manage to win its fellow stakeholders to its side.
The risk of a consortium driving the most important smartphone system is that decision making is slow and prey to in-fighting and political agendas. Ericsson may, in pursuing its own very reasonable interests, be putting Symbian at a disadvantage when competing with Windows, a technology that is undoubtedly propelled by a single power, and a very decisive one at that.
Windows Mobile makes progress
And Windows Mobile is making some progress, as its next upgrade was outlined to Microsoft mobile developers this week. It is doomed as a mass market cellphone operating system, but it remains a strong contender in the enterprise and power user sectors once occupied by the PDA.
With the new release, its user interface is rapidly approaching Series 60 in terms of usability and has the advantage of being familiar to regular PC users. The choices made by LG highlight the differences between the two systems. It will use Symbian OS on phones for Europe - the platform remains over dependent on its native territory - and Windows Mobile for PDA/phone hybrids for Asia, targeted mainly at the enterprise.
As important as the choice of Symbian was its decision to license Series 60, indicating again that this entirely Nokia-controlled platform is becoming a de facto standard as important as the OS itself.
Also licensing the twin technologies this week was Lenovo, the Chinese handset maker formerly known as Legend. It will be the first Chinese vendor to deliver Symbian OS phones - another blow to Microsoft, which saw China as a highly promising market for Windows Mobile.
The more successful Series 60 is, the harder it will be for Windows Mobile to make inroads into smartphones, since it is this software environment, rather than the OS, that will win or lose the hearts and minds of the end users and the all-important development communities.
Over 100 operators worldwide now sell Series 60 phones from five manufacturers and Nokia announced at CTIA Wireless this week that the platform would support CDMA later this year. This is an important development, since it should help to counter the overly European bias of Symbian OS and bring in new US and Asian carriers. It is likely that LG, which is strongest in CDMA, will bring out both GSM and CDMA Series 60 phones later this year, as will Nokia itself.
Nokia plans to use the Series 60 reference designs to gain control of the smartphone market and to push its own chips, including its embryonic CDMA line, emulating the way that Microsoft and Intel seized the PC sector in the late 1980s.
However, Microsoft itself is the master of that game and, for all the inherent failings of its smartphone technology and the suspicion with which it is regarded by operators, it is starting to marshal its allies with something of its old cunning. Most important among them is Motorola, which has a multiple OS strategy but recently announced its first Windows smartphone. Like LG, the second largest phonemaker will target its Microsoft models mainly at the enterprise and, to that end, it has licensed Good Technology's email software to mount a direct challenge to the installed base of the RIM BlackBerry among US businesses.
AT&T Wireless and Verizon Wireless are now both carrying Motorola/Windows phones, though both say these are only really of appeal to the enterprise space, not the mass market.
Microsoft's friends and foes
The Motorola relationship gives Windows Mobile much needed credibility in the cellphone market but even more critical to its strategy are applications that tie companies into its .Net framework and therefore encourage them to adopt the Windows phones that can tap into .Net web services. One such app was unveiled this week, with the launch of Microsoft MapPoint Location Server. This uses location capabilities in smartphones to track and manage goods, deliveries or workers, feeding data back to the central .Net applications. Sprint and Canada's Bell Mobility plan to launch services based on the platform.
In the light of the European Commission's record $612.7m fine on Microsoft for bundling practises regarding Windows Media Player, its cellphone rivals are sure to be stepping up their own efforts to defeat the company in the law courts as well as the markets.
The Computer & Communications Industry Association (CCIA), a trade group in which Nokia is a leading light, complained to the EC a year ago that Microsoft was using its position in the PC market in an anti-competitive way to break into the cellphone space. Now members of the group are starting to make new noises, including allegations that Microsoft designed its latest email server, Exchange 2003, to work better with Windows Mobile phones than with other handsets.
"These strategies serve to protect and reinforce their existing monopolies and spread into adjoining markets and dominate those," said Ed Black, the CCIA's CEO.
At Microsoft's annual Mobile Developer Conference this week, the company unveiled Windows Mobile 2003 Second Edition. Among its features are support for smaller device with keyboards and for high resolution displays, plus dynamic screen switching between landscape and portrait modes.
Microsoft chairman Bill Gates also launched Microsoft Speech Server 2004 at the mobile developer conference. This is designed to unify web and telephony infrastructures using .Net frame-works for speech-enabled access to applications from Windows cellphones and PDAs.
© Copyright 2004 Wireless Watch
Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.