Wireless Watch: Qt sale marks the final death of Nokia’s software independence Aug 9, 2012 – Rethink Research
Nokia has sold the remains of its Qt software framework to Digia, a fairly small development in its ongoing reorganization, but one full of symbolic significance. Qt was acquired to be the basis of a strategy to transform Nokia into a web software player, moving away from Symbian and closed devices to a multiplatform, cloud-focused world. But the company failed to execute on the vision, or at least not quickly enough for investors, and threw its lot in with Microsoft. The successive cancellations of its own software projects – Meltemi, MeeGo and Qt – have left it entirely without control of its OS destiny. That brings some advantages, but makes it as vulnerable to Microsoft’s whims as the PC makers, currently bemoaning the advent of the Surface tablet to compete with their own offerings. And despite its special relationship with the Windows giant, it will have nowhere to run if, as looks likely, Samsung decides to get serious about the WP8/W8 combination in future too.
The old Nokia, which ruled the cellphone waves for so long, has suffered death by a thousand cuts, but none seemed more final than the end of its homegrown software ambitions with the sale of the rest of its Qt unit to Digia. The Finnish developer had already acquired the Qt licensing framework, and now takes on the rest of the business, joining Jolla and several other Finnish specialists in seizing Nokia’s offcuts. The sad thing is that those offcuts, differently managed and addressed with more urgency, could have made Nokia into a genuinely powerful cross-platform applications player. It had a strong vision, when it acquired Qt developer Trolltech, of what it needed to do in mobile web software. But it did not execute quickly or cleverly enough, and the exigencies of the ruthless handset war overtook its efforts, which by their nature needed time to deliver results. Now, with Symbian close to its end, and both MeeGo and a Series 40 replacement cancelled, Nokia has given up the last vestiges of software independence, and becomes a true acolyte of Microsoft.
As such, it will have the same benefits and problems as other Windows-only vendors like most PC makers – on the plus side, a platform backed by huge resources and developer community and a limited need to invest in R&D; on the negative, the battle to differentiate, and the vulnerability to Microsoft’s whims. Nokia has done well on the first challenge, with Lumia by far the most high profile WP7 smartphone range, though that is largely because other players like Samsung are treating Windows Phone as a second or third string. But it has already suffered from the latter. Despite being promised special influence over the Windows Phone roadmap and user experience, when it threw in its lot with Microsoft early last year, that did not stop the Redmond behemoth announcing that the upcoming WP8 would not be backwards compatible with the current OS – leaving Lumia users with a dead end product and a dangerous temptation to try another platform when their upgrade comes around.
There are good reasons for the software giant to unify Windows 8 and WP8 more closely – the reason for cutting many ties with WP7 – and in the end those will benefit Nokia, which will find it easier to move into other form factors, such as tablets, for the first time, riding on a harmonized platform, user interface and apps base. Nokia is likely to ensure it is the biggest hitter in launching WP8 handsets (see separate item). But despite all that, it must feel like Sisyphus, rolling a boulder up a hill only to see it fall back to the bottom, as it in effect kicks off a new OS from scratch, for the second time in a year.
But it no longer has any power to fight Microsoft on this, since it has no alternative OS, unlike other WP8 supporters like HTC and Samsung. Though new Nokia chairman Risto Siilasmaa said in June that the firm had a ‘plan B’ should the Windows Phone strategy fail, the words sounded hollow given that, since he gave that interview, several more internal software projects have fizzled out, while external options such as switching to Android appear hopeless. Siilasmaa may see the chance to seize on a next generation multiscreen OS, such as Firefox Mobile, to revive Nokia’s fortunes and control of its destiny, but such a move would be both extremely difficult and out of character with the Finnish firm’s culture, even in its heyday.
So for now, it is stuck with Windows Phone and, for the featurephone space, the ageing Series 40. Yet until this year, Nokia still had a treasure chest of undersung, and sometimes under-resourced, but nevertheless valuable OS jewels. Initially there was Maemo, its attempt to create a modern, web-oriented mobile Linux platform, which got merged with Intel’s Moblin to form MeeGo. That got sidelined as both partners turned to other friends, and now lives on as part of the Tizen open source project (still backed by Intel but with Samsung the prime mover), and in a start-up called Jolla, made up of former Nokia engineers. Jolla is targeting exactly the sweet spot where Nokia itself should be strong – ‘smart featurephones’ with strong web capabilities and very low prices, and already has a distribution deal in China.
Nokia was also developing a replacement for its real featurephone OS, Series 40, in a project called Meltemi. This also held real promise, bringing web and cloud capabilities to ultra-low cost gadgets and providing a superior user experience in a segment where most differentiation comes from pricing – and where, as a result, the Finn has been losing its stronghold to Chinese and Indian suppliers. Nokia’s strength lies in the exploding demand for a strong web experience and good localized apps on cheap, resource-constrained devices and networks. It has now thrown away two platforms which could have enabled it to offer real value in a sector which Apple largely ignores, and where low end players lack user experience quality.
A hierarchy of OSs – Windows Phone from the high end down to the midrange, then MeeGo and then Meltemi – would have covered all the bases, given Nokia more independence, and solved its huge current problem, of having nothing to replace Symbian and S40 in its heartland bases. It has squeezed WP7 down to smaller, cheaper devices, but that only goes so far, and the vacuum in the featurephone offering has been clear in its recent quarterly results, where the low end has been a factor as much as the much discussed smartphone transition. There has been much criticism of the OS strategy – Tomi Ahonen, former Nokia executive turned blogger, wrote a letter to CEO Stephen Elop calling him "the worst CEO ever seen in corporate governance” because of the decision to relegate MeeGo.
But to be fair to Elop, there are many mobile operating systems out there, including several emerging ones for the next generation, where cloud streaming and support for cheap handsets will be hallmarks. Nokia could still partner with Firefox, Tizen or another player and save itself the investment in struggling to make an OS stand out from the crowd and gain critical mass. Its real mistake has been to walk away from Qt, which fitted a world where the individual OS will be increasingly irrelevant, and differentiation will come from cross-platform user interfaces, applications and web services based on technologies like HTML5.
When Nokia acquired Trolltech at the start of 2008, gaining a powerful multiplatform developer framework and Linux expertise, we regarded it as a masterstroke against the nascent Android and a signal that the Finn was serious about becoming, as then-CEO Olli-Pekka Kallasvuo had pledged, a web software company with devices on the side. Kallasvuo, for all his faults, had understood that the software platform and UI would be the key to the new mobile battle, and Qt was a fine selection to give Nokia a gradual exit route from Symbian, and towards building a base that would span more modern OSs, whether its own or those of third parties.
Trolltech brought a well respected development framework geared to mobile devices, open source and web services, accelerating Nokia’s fledgling efforts to push Series 60 and S40 towards openness and the web. It was aware that, with its heritage of closed development environments, even the open sourcing of Symbian would not make it a match for a new Linux system like Android. Trolltech would help to boost the capabilities of S60 on open platforms, as well as underpinning development of new OS-neutral mobile internet technologies. Nokia also gained the opportunity to take the driving seat in defining future open mobile standards, and gaining all-important influence at the expense of Google. "Trolltech and Nokia share the goal of accelerating the adoption of Trolltech's Qt-based technology in the commercial market and in the open source community,” commented the start-up’s CEO and co-founder Haavard Nord at the time.
Even when Nokia adopted WP7, there was still the lingering hope that it might harness Qt, whose engineers had put so much into MeeGo, for a multi-OS strategy, resting on its Linux-based activities as well as Windows and so retaining the ability to target many sectors, and replace Symbian quickly (the belief that Symbian would have several years of useful contribution ahead has been one of Elop’s biggest tactical errors, perhaps born of his own Microsoft roots, but leaving the firm with a revenue hole it now cannot fill).
But Qt is gone. Last year, it sold the commercial licensing and services aspects of the business to Digia, and moved the platform and its development to an open governance model – also the fate of the residual MeeGo efforts. Nokia insisted Qt would remain the development framework for Symbian, and would be part of its "future disruptions strategy”, an initiative to develop experimental and next generation gadgets. This program appears to have become a casualty of recent massive job cuts.
Digia said at the time that it would push Qt on desktops and embedded systems such as the auto market – where Trolltech founder Benoit Schillings (now, interestingly, at Facebook) believes the future lies for MeeGo and Qt. As part of the deal, 3,500 desktop and embedded Qt customers were transferred to Digia and the firm took on 19 Nokia staff.
Now Digia has taken on the software itself and says it will soon release Qt for Android, iOS and Windows 8 and will continue to support both open source and commercial licence programs. As part of the transaction, up to 125 Nokia employees will transfer to the smaller firm, based in Oslo and Berlin. No financial details of the acquisition were released, but Digia said it expects the deal to add to its revenues. Last week, more than 50 employees at Nokia's Brisbane, Australia office, mainly concerned with Qt, were laid off with the closure of that location.
“With Nokia smartphones relying on Windows-based applications, which are rapidly increasing in number, Qt no longer has a role to play in Nokia’s smartphone efforts,” Liberum Capital analyst Janardan Menon told Bloomberg. “Nokia is keen to restructure, to squeeze out margin as well as improve cash where possible.”
But as the WP7-to-WP8 migration issue has highlighted, that reliance on Microsoft comes at the cost of impotence. And what if Microsoft, as has been rumored, decides to launch its own smartphone? Far longer established partners than Nokia have recently suffered from Microsoft’s capriciousness. HTC, the most loyal mobile Windows supporter, has reportedly been excluded from the inner circle for developing tablets based on ARM-based Windows 8. And PC OEMs like Acer have been unsettled by the launch of Microsoft’s Surface tablet, also designed to showcase Windows 8, in both its x86 and ARM variants.
When Microsoft announced the Surface, some PC makers took the view that it was merely seeding the market, and would then step aside for its established partners. Indeed, unless the product proves to be an iPad-class success, we still believe this will be the medium term outcome, since Microsoft needs a wider base for its platform than its limited hardware skills can possibly deliver – and even its PC partners have other choices these days, mainly centered on Linux, HTML5 and the cloud. However, the Surface will be a real commercial offering, and some of the traditional vendors are getting rattled, as the dark side of the Microsoft deal becomes clear.
Acer is calling on the Windows giant to “think twice” before it gets serious about the device business, and even threatening to switch to a different operating system. The firm’s CEO, JT Wang, told the Financial Times newspaper that Microsoft launching its own tablet would be a “huge negative impact for the worldwide ecosystem” in PCs. “We have said think it over. Think twice," he said in the high profile interview. "It is not something you are good at so please think twice."
He even hinted that Acer could distance itself from Microsoft – a threat which, if followed through by any major PC maker, could open a new door for Linux-based alternatives like Ubuntu from the desktop world or Android from mobile. Hewlett-Packard might even be regretting it relegated webOS to a backwater so quickly. "If Microsoft is going to do hardware business, what should we do? Should we still rely on Microsoft, or should we find other alternatives?" Wang said.
Of course, such words are more likely to be designed to put public pressure on Microsoft than to spark a sudden defection from Windows, and the fears are not shared by all PC suppliers. Lenovo says it is not worried about the Surface. It has announced its own new tablet, the ThinkPad Tablet 2, and the VP of that division, Dilip Bhatia, told ABC News: "Microsoft is a strategic partner for us. The Surface has brought more excitement to the marketplace. The ThinkPad tablet is focused after the business individual; the Surface is more geared towards the consumer offering."
Of course, Lenovo is moving up the PC league tables, threatening to overtake Dell and threaten leader HP, while fourth placed Acer faces many challenges, and is likely to be thrown more genuinely on the defensive by any new competition. But Wang’s words do reflect a level of concern in the market – one which Microsoft itself may not see as negative. One of the motives behind the firm creating its own tablet and launching it with such impact was probably to shake up its traditional partners and showcase the kind of device it believes to be necessary for Windows 8 to thrive. Microsoft is well aware that mobile norms have driven the personal device sector in recent years, and the PC sector where it has most influence needs to fight back – a view shared with Intel, with its ultrabook platform.
Microsoft itself is recognizing other risks in its tablet strategy. In its recent annual report, it stated that developing an ARM-targeted flavor of Windows 8 could negatively affect its relationship with its usual OEMs, and that it will be tough to build up an applications base. In a July SEC filing, Microsoft added: "Even if many users view these devices [Android slates] as complementary to a personal computer, the prevalence of these devices may make it more difficult to attract applications developers to our platforms. In addition, our Surface devices will compete with products made by our OEM partners, which may affect their commitment to our platform."
However, for Nokia as for Acer, the question is, what are the real alternatives to Windows? There are plenty of candidates – Ubuntu, Open webOS, Chrome OS and so on – but Nokia knows how long and painful OS transitions are, and none of the Linux options is really proven to be the leader of the pack (except, in mobile, Android, where Google is also getting into hardware).
Nokia’s chairman spoke of a plan B, but in the eyes of the industry, most of these are either far-fetched or involve the company being acquired, perhaps by Microsoft itself. In fact, there is little real point in Microsoft investing the money and heartache, since it has full control of its handset partner anyway, though other bidders could emerge, at least for sections of the company. Many web players would like to get their hands on the important location division centered on Navteq; the basic handset operation, still huge in scale and brand, might boost the efforts of a ZTE or Huawei. In the past week, there have even been theories that Intel might be interested (see Ben Woods at CNet), reviving the old MeeGo alliance to create its own chip-to-OS platform and challenge Qualcomm’s increasing closeness to Microsoft.
The market took more seriously rumors that Nokia was a target for Chinese PC maker Lenovo, which has been expanding rapidly in handsets, though mainly in its home country. The Finnish firm’s shares leapt on the speculation last week, though Lenovo’s EMEA chief, Gianfranco Lanci, dismissed it, saying: "This must be a joke. There's nothing ongoing."
There is also much speculation about where the Nokia Siemens unit might end up, though the inevitable talk of a merger with similarly struggling Alcatel-Lucent would be a prime example of tying two rocks together and hoping they might float. There are other candidates though. As Patrick Donegan, senior analyst at Heavy Reading, argues, NEC would be one – it is trying to revive its sidelined mobile equipment business with a 4G small cells strategy but could benefit from NSN’s customer base, 3G technology and scale. And NSN would gain the back office and cloud platforms which the Japanese firm has been building up with the purchase of NetCracker and Convergys. NEC is also a leader in the fashionable software defined networking area. Another candidate for NSN could be Samsung, which is also trying to transform its infrastructure business from WiMAX niche player to a major force in LTE.
Assuming no buyer for all or part of Nokia emerges any time soon, other contingency plans look left-field and unlikely. For instance, that the firm could license BlackBerry 10, the upcoming new OS from RIM – a rumor revived this week, yet again, about Samsung. The Korean firm quickly denied reports it was interested in licensing BB10 or even acquiring RIM, and one insider said the company’s priority was to streamline its software platforms, not add more. While the Korean firm has a tradition of supporting any OS with sufficient market presence – and certainly wants to avoid over-reliance on Google, now the search giant has Motorola and Nexus 7 – it is likely to focus mainly on Android; some combination of its own Baidu and the open source Tizen; and probably a stepped-up focus on Windows. The convergence of WP8 and Windows 8 may cause short term problems for Nokia, but it makes the platform more attractive to Samsung, which is increasingly pursuing a multiscreen strategy. It could buy into Windows more heavily than it has to date, to support a PC/tablet/phablet push. And serious activity around WP8 by Samsung would be the worst news of all for Nokia.
Wireless Watch: Qt sale marks the final death of Nokia’s software independence
