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Nokia acknowledges risk of Microsoft building Surface phone

updated 09:05 pm EDT, Sun March 10, 2013

Nokia filing sees Microsoft as possible threat

Finnish smartphone maker Nokia is well aware of the threat Microsoft would pose should it decide to enter the smartphone manufacturing business in the same way it entered the PC making business. A recent SEC filing from the company acknowledges that possibility, as well as others, when enumerating possible threats to Nokia's business. The filing illustrates the tenuous relationship between Microsoft and its hardware partners, who are wary of the possibility that the company supplying them with the software to power their devices could wind up becoming a competitor.

Nokia's 2012 20F form was released on Thursday, detailing the risks Nokia sees to its own business. The form acknowledges that the company may not be able to convince Microsoft to add features to Windows Phone 8 that Nokia deems important, as well as the possibility that Microsoft could reduce investment in the operating system or discontinue it if it does not thrive. Shortly thereafter, Nokia acknowledges that Microsoft could enter the Windows Phone arena itself.

"Microsoft may make strategic decisions or changes that may be detrimental to us. For example, in addition to the Surface tablet, Microsoft may broaden its strategy to sell other mobile devices under its own brand, including smartphones. This could lead Microsoft to focus more on their own devices and less on mobile devices of other manufacturers that operate on the Windows Phone platform, including Nokia."

The admission is not the first by Nokia of such a possibility. Rumors of a Surface phone arose shortly after Microsoft introduced the Surface in mid-2012. Nokia CEO Stephen Elop was unfazed by the rumors then, said such a device, were it to be introduced, would not negatively impact the relationship between the two companies.

Elop continued, saying that, because of their special relationship, Microsoft had built into Windows Phone 8 certain functionalities that only Nokia can take advantage of, especially with regard to photography.

Nokia has essentially bet the company on the success of Windows Phone 8. Its Lumia line of Windows Phone 8 devices have proved to be the best selling of all WP8 handsets. After successive quarters of considerable losses, the company finally turned a profit in the fourth quarter of last year, though it still lost $3 billion in total for the year.

Microsoft last year began competing with PC hardware manufacturers by releasing its Surface tablets. PC makers were not happy that their chief software provider was now competing against them, with some asking the company to "think twice" before stepping into the hardware arena.

by MacNN Staff



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