Nokia Said to Add Lower-Priced Phones Running Android This Month

Feb 11, 2014 9:54 am ET

Feb. 11 (Bloomberg) -- Nokia Oyj, whose mobile-phone business is set to become part of Microsoft Corp., plans to introduce handsets that run on the Android operating system made by the software maker’s rival Google Inc., according to people familiar with the matter.

The Finnish manufacturer is preparing to present more than one lower-end Android smartphones this month to tap into growth in countries such as India, said one of the people, asking not to be named because the devices haven’t been made public. The phones, which will have access to a Nokia application store rather than that of Google’s, are set to be announced at the Mobile World Congress in Barcelona, which starts Feb. 24.

Nokia has struggled to win back users from Android devices and Apple Inc.’s iPhone with its Lumia smartphones running Microsoft’s Windows software. Cheaper Android devices from manufacturers such as Samsung Electronics Co. have gained customers at Nokia’s expense in regions such as Asia.

Doug Dawson, a spokesman for Espoo, Finland-based Nokia, declined to comment on the company’s Android plan.

The move means Microsoft is set to own a business that makes phones using software from one of its fiercest competitors. Redmond, Washington-based Microsoft, the world’s largest software maker, is aiming to complete its purchase of Nokia’s handset unit this quarter.

‘Too Expensive’

Microsoft agreed to buy the phone business for 5.44 billion euros ($7.4 billion) in September, seeking to gain ground from Google and Apple, whose operating systems dominate in mobile devices. While Nokia has made Windows phones since 2011, the operating system’s growth rate has failed to match that of Android, which can be used in devices costing $100 or less. Nokia’s top Windows models cost several times more.

“Microsoft needs products for the low-end market and current Windows-based phones are not suitable for that because they are too expensive,” said Hannu Rauhala, an analyst at Pohjola Bank in Helsinki.

Microsoft isn’t planning to build a long-term strategy around Android devices, one of the people said. Rather it may be planning to use the Nokia Android phones to bolster its sales in the lower end until it can produce Windows phones for that market segment, the person said. A Microsoft representative in London declined to comment.

The Wall Street Journal reported yesterday Nokia’s plan to add an Android device.

India Market

Stephen Elop, head of the unprofitable phone unit, abandoned Nokia’s own smartphone software and adopted Windows after he joined in 2010. Nokia’s sales have plunged since as nascent demand for Windows smartphones has failed to make up for falling demand for older models. Elop is rejoining Microsoft along with his division.

Once the world’s largest smartphone maker with a market share topping 50 percent, Nokia now ranks outside the top five with about 3 percent share. Android devices made up 78 percent of smartphone shipments last quarter, according to data compiled by Bloomberg. Smartphone shipments in India rose 170 percent to 44 million units last year, according to research firm IDC.

Lumia sales reached 8.25 million units in the final quarter of 2013, compared with 8.8 million smartphones during the previous period, according to IDC. The line of smartphones remains far behind Samsung and Apple, which sold more than 130 million smartphones during the quarter combined.

--Editors: Ville Heiskanen, Kenneth Wong