By Malik Saadi

Nokia’s announcement that it intends to acquire Symbian comes as little surprise to the industry, though the OEM’s plan to take Symbian and the S60 platform into the open-source world was a striking revelation. It is a radical shift in Nokia’s terminal-software strategy and could completely change the open-source game in the mobile handset market.

There are several reasons why it makes sense for Nokia to acquire Symbian. For one thing, it is the firm’s main shareholder, with a 48 per cent stake, with the rest shared among Ericsson, Sony Ericsson, Panasonic, Samsung and Siemens.

It is also the main user of the Symbian operating system. About four-fifths of the more than 200 million Symbian devices that have been shipped use the S60, most of which were from the Finnish vendor itself.

The S60 is supported by the largest number of developers of applications for mobile devices powered by Symbian, with applications including SIP apps, softphones, widgets and games. And Nokia has taken the greatest advantage of Symbian software development, having been consistently first to release mobile phones powered by the latest versions, often several months before any other licensee.

Nokia has agreed to pay about ?264 million ($410 million) to acquire the rest of Symbian, a reasonable sum. Estimates from Informa Telecoms & Media indicate that Nokia has already paid more than $700 million to Symbian in royalty fees and could pay over $500 million more in the next two years if it were not to acquire the firm.

It is becoming evident that open-source mobile platforms – particularly the Open Handset Alliance’s Android and LiMo’s mobile platform – present potential threats to the leading mobile OS platforms, notably Symbian, Microsoft Windows Mobile and RIM’s BlackBerry. The mobile industry, including Nokia, can no longer underestimate or ignore these threats.

In addition, as much as 92 per cent of Symbian’s revenues in the past have come from royalties related to licensing the Symbian OS. This business model is well-suited for the current smartphone market, which is experiencing strong growth, but it is likely to be less effective when market saturation is reached. At that point, a combination of downward price pressure on royalties – due to competition, mainly from open-source offerings – and reduced growth will result in a decline in revenue. It was therefore necessary for Symbian to look at new business models to secure new channels of revenue and reduce its reliance on royalties.

Nokia’s decision to take Symbian to the open-source world is interesting. This business model is likely to give Symbian a new lease on life, not only because it will enable the OS to tap into the open-source development community, which will accelerate innovation, but also because the move will attract more handset vendors and operators to the Symbian Foundation (SF). Thus, Symbian’s revenue model will gradually migrate from being royalty-based toward charging for professional services, customization and product development.

Nokia has been experimenting with the open-source model since the late 1990s and has developed a strong understanding of the market. Its focus has been on two major segments: the MAEMO project, an application-development platform for its noncellular Internet Tablet devices that was announced in 2003; and the Nokia S60 web-kit project announced in 2006 and now deployed as the main web browser for third-edition S60 handsets. Nokia is also involved in more than 15 open-source projects, which have played a significant role in enabling the company to be one of the first to introduce a number of features to mobile phones, including Bluetooth, SIP, VoIP and Internet radio. Most recently, Nokia has acquired Trolltech, a leading player in Linux middleware and integration services, with the aim of building cross-platform software strategies for mobile devices and desktop applications in an effort to compete with likes of Google and Apple.

But Informa says the most significant development in the mobile open-source industry is the creation of the SF. This move could be seen as a reaction to the mobile industry’s growing interest in open-source offerings in general but, most importantly, it could be interpreted as a direct response to the threats from the two largest mobile open-source groups: the OHA and the LiMo Foundation.

Nokia is contributing both Symbian and its S60 platform to the SF; Sony Ericsson and Motorola are contributing the UIQ platform; and NTT DoCoMo is contributing its MOAP platform. Only selected components will be made available initially, and the entire SF platform will not be fully open-source until 2010.

Nokia’s strong experience in open-source software, combined with the extensive distribution reach of SF’s founding members, such as Nokia, Samsung, Motorola, Sony Ericsson, LG and NTT DoCoMo; the maturity level of the Symbian OS, S60, UIQ and MOAP, which form the heart of the SF platform; and the already established developer community supporting the Symbian OS, mean that the SF has all the prerequisites to succeed and dominate the mobile handset market.

It is worth noting that some SF mobile operator members, including NTT DoCoMo, AT&T and Vodafone, are also members of LiMo and/or the OHA. This implies that these members are willing to use the new open-source-based Symbian, OHA’s Android and the LiMO platform in different segments of their portfolio. But Informa says that at this early stage of open-source development, mobile operators are testing and experimenting with the capabilities of different platforms before making any decision to use only one or two OSes. In this highly competitive market, operators might prefer to develop offerings that use an advanced and established open-source framework, such as Symbian, rather than immature platforms, such as LiMo or OHA’s Android, which still have to prove that they can live up to their promises.

The creation of the SF will also put significant pressure on Microsoft to partly or fully open the source of its Windows Mobile OS, the current main competitor to Symbian OS. Other competitors, such as RIM and Apple, might also want to make their platforms open-source to spur innovation and attract application development for their respective OSes.

The contribution of the S60, UIQ and MOAP will be critical to the success of the SF. Although the three platforms compete for the same market and it will take some time to harmonize them, the combination of their respective strengths could lead to the creation of a strong platform with considerable mix-and-match possibilities to fulfill the requirements of different market segments. If the SF manages to combine the best assets of the S60 in supporting advanced features and functionalities, UIQ’s touch-screen and advanced graphic potential and MOAP’s flexibility in supporting different mobile services, it will be tough indeed for other open-source frameworks to match the capabilities of such a platform.

Taking Symbian and its supporting UIs to the open-source environment could give the platform greater flexibility and increased modularity, enabling it to adapt to different market requirements and enabling its vendors and operators to differentiate themselves from the competition. At the same time, the creation of many variants of Symbian could lead to the fragmentation of the platform. A similar situation has prevented Linux from gaining momentum in the mobile market and Java from achieving its aim of working on all devices.

If fragmentation and the resulting interoperability problems are not resolved at an early stage, they will hold back application development, because developers will be required to port their applications to different OS variants. This is not economically viable for many small developers and can discourage innovation. Problems with interoperability can also prevent users of different variants from sharing their experiences.

In short, the creation of the Symbian Foundation marks the start of an exciting era that will completely change the landscape of the mobile-terminal-software industry. Developments that take place between now and 2009 or 2010 will determine the winners and losers in this important and growing market.