Nokia Corp.'s decision to buy the 52 percent of Symbian it didn't already own may threaten Google's Android and Microsoft's Windows Mobile operating systems.

In an agreement announced yesterday with Sony Ericsson, Motorola and NTT DoCoMo, Nokia also will unite Symbian's various mobile operating systems to form a single, open, royalty-free mobile software platform. The Symbian purchase is valued at $410 million.

"It's going to be a challenge for new players trying to launch operating systems, such as Google's Android and the LiMo Foundation," said Bonny Joy, analyst at Strategy Analytics, New York. "This brings an established brand to the market and provides an existing platform, a known solution that will be free."

Additionally, Nokia will partner with AT&T, LG Electronics, Samsung Electronics, STMicroelectronics, Texas Instruments and Vodafone to establish the nonprofit Symbian Foundation, which will promote the unified, open source operating system platform. Membership will be open to all organizations.

Both Symbian competitors Android and LiMo will be free, open-sourced, Linux-based mobile operating systems. Google recently announced that it was pushing back the launch of its Android platform till the end of the year. There is speculation that it may be pushed back even further.

"These platforms still need to be proven and there are big challenges, such as bugs," Mr. Joy said. "I'm sure that Android will be delayed again. It will be a challenge to differentiate it now that Symbian will also be royalty-free."

Nokia's royalty-free operating system platform won't much affect Apple or BlackBerry-maker Research in Motion, since they don't license their operating systems. However, it may have a great impact on Microsoft's Windows Mobile platform, which charges a royalty fee between $4 and $15 per phone.

"Microsoft might find it a bit difficult to stay at the higher royalty rate going forward," Mr. Joy said.

"Why should someone pay an additional $15 if they can get an OS for free?" he said. "There will be pressure from vendors and carriers who are choosing their operating system, since Microsoft may be the only major player still operating under a licensing-fee-based model."

Windows Mobile has proven popular with U.S. business customers, while Symbian is the most used mobile operating system worldwide because of its success in appealing to the average consumer.

Symbian's success has not translated to the United States, however, because the vendors that support it, primarily Nokia, Sony Ericsson and NTT DoCoMo, are based in Europe and Asia and haven't built a significant presence in the U.S. market.

"This deal could increase their presence in the U.S., since AT&T is a partner in the Symbian Foundation," Mr. Joy said. "It is very logical to expect that AT&T is going to use that as one of the platforms of choice in their device portfolio, since it's already in place. This is the most ready platform in the marketplace."

On a tier
The advent of open-sourced, royalty-free operating systems may also mean that these platforms will soon be available on a much wider range of mobile devices, not just the extreme high-end of a manufacturer's product line.

"Handset manufacturers are looking to build these high-level operating systems into mid-level devices," said Kevin Burden, director of mobile devices for ABI Research, New York. "Carriers are actually demanding this as well.

"Down the road, what this eventually could mean is that every phone will be a smartphone," Mr. Burden said. "It could be 10 years down the road, but a lot of factors are driving it in that direction."

An effect of the Nokia-Symbian deal could be that carriers could use a different operating system for each different tier of phone. Sony Ericsson was using Symbian for its high-end phone, but also announced a Windows Mobile phone for business users.

"This could be pushing Symbian towards the mid-tier," Mr. Burden said. "Nokia acquired Trolltech several months ago, and Trolltech is all about Linux, so Nokia may be ready to announce a higher-end platform for their new high-end line of mobile phones."

What is certain is that handset manufacturers are going to pay a lot more attention to open-source, royalty-free OS platforms.

"Innovation will happen much faster on open-source platforms," Mr. Burden said. "Under a licensing model like Microsoft's, innovation won't move as fast. The license-free method also allows handset manufacturers to play in multiple camps as far as operating systems.

"Could Microsoft lose a little bit of favor in the market? Possibly, but it still has a very strong following among business users, which Symbian doesn't," he said.

Smartphones resonate best with business users, whereas their appeal is often lost on the average consumer - Symbian's focus. That is one reason Symbian has had trouble getting a foothold in the U.S. market.

Many analysts see the Nokia purchase as a direct response to Google's Android platform and an outright challenge to Microsoft's royalty-based model.

"If this open-platform movement is the way of the future, then Microsoft might have to make a move," Mr. Burden said.

"It's curious timing, because if they had bit the bullet and done this a couple of years ago, we may never have seen a market for Android or LiMo, but doing it now also means that there's a little momentum that can be saved on the part of Symbian," he said.

The success of the BlackBerry and the iPhone is forcing high-end operating systems manufacturers to change strategy as they try to gather control over hardware and software platforms.

"In the mobile device market, the differentiators are the types of service you can enable and what type of content can you connect to," Mr. Burden says.

In this new competitive mobile landscape, the stakes are high and there is no clear front-runner.

"There is no single dominant player that provides a single platform for software and hardware that manufacturers can rally around," said Michael Gartenberg, vice president and research director for JupiterResearch, New York. "There's a war going on for the hearts and minds of developers and OEMs [original equipment manufacturers]."

Perfect timing
Many analysts see this as an attempt for Nokia to shore up its position by acquiring more hardware licensees and thus get more software developers onboard -- and, of course, an attempt at one-upmanship.

"This is more of a threat to Microsoft and Google than it will be to Apple or Research In Motion," Mr. Gartenberg said. "This is a response to Google making Android free. They're saying, 'Stuff that we used to charge you for is now free. Microsoft, beat that.'"

This is going to put more pressure on Microsoft in terms of its relationships with licenses. Since Microsoft doesn't build phones, it builds the stuff that other people put into phones. So it can't make up the profits from licensing with phone sales, unlike Apple, Research In Motion and Nokia.

"There's a battle going on for developers, because they create the software applications that ultimately drive consumers to the products," Mr. Gartenberg says.

"If you make it more attractive to the licensees, then you can get more handsets on the market, which means you have a better selling point for developers," he said. "The more stuff that's out there, the more stuff they can sell."

One lesson that Nokia has learned is that you can't compete with your own licensees.

"You cannot license a software platform and simultaneously compete with the manufacturers you are licensing to," Mr Gartenberg said. "It doesn't work and never has worked, and this is the final proof."

There is a high-stakes battle for the mobility marketplace. There are no clear-cut favorites at this stage of the game.

"Nokia is saying, 'We're giving everything away, we can all compete in terms of execution,'" Mr. Gartenberg said. "This is a pretty big deal, a huge step on the part of Nokia. Third-parties now have choices without paying those nasty licensing fees.

"This is a bet that they're making for hundreds of millions of dollars," he said. "This is another potentially big disruptor in the marketplace and now it's all about execution."

This move could also help Nokia make inroads into the U.S. market.

"Royalty-free operating systems will fuel even quicker adoption of smartphones in the U.S. by helping drive down or, at least, maintain the costs of smartphones," said Nic Covey, Chicago-based director of insights at Nielsen Mobile. "Fashioning more cross-device consistency in the operating system enhances the experience for both users and developers."

This move ensures that Nokia remains highly relevant in a market in which it has long been the leader. This aligns with other Nokia efforts to help further establish it not just as a hardware brand, but a key player in the broader sphere of consumer experience.

"The timing is no coincidence, to be sure," Mr. Covey said. "Pre-launch of the next-generation iPhone and on the heels of Google's delay of Android, Nokia nods to consumers and developers to say 'Hey, we've still got something cooking, too.' The timing couldn't have been better.

"Cutting the royalties on Symbian operating systems puts a lot of downward pressure on the fees others have been able to excise," he said. "If others want to compete at the same level, they're going to have to activate alternative ways to monetize their embedded base pretty quickly."