Nokia's Android project is real, Chinese report claims

A new report claiming Nokia has an Android-powered smartphone in the works raises some questions following Microsoft's acquisition.

Nokia has manufactured 10,000 Android smartphones under a contract with Foxconn, the Chinese Weibo blog Ctechnology reports. Ctechnology has proven itself somewhat reliable in the past, accurately reporting leaked images of the iPhone 5s in advance of Apple’s announcement last week.

The report claims that manufacturing and testing will continue at least until November, when the Nokia acquisition will be finalized.

The Nokia/Android smartphone is reported to be based on a Qualcomm 8225Q, a non-LTE system on a chip (SOC) designed to power high-volume, low-cost smartphones.

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If this report is accurate, it means Android was more than a casual project by a few Nokia hackers. The explanation for this project could have its roots in the Nokia Asha feature phone based on the Series 40 software platform. Nokia has shipped more than 1.4 billion Series 40 devices.

Feature phones have been prey to low-cost Android smartphone upgrades. The Asha feature phone installed base is shifting to Android, so given the anemic success of Nokia’s Windows Phone, Asha users are defecting to other brands of Android smartphones. Nokia shipped 54 million feature phones in the second quarter of 2013, down 25% from the 73 million shipped during the same quarter of 2012. It makes sense that Nokia would want to keep a feature phone customer that was not a candidate for a Windows Phone-powered Lumia by offering a low-cost Android smartphone.

Anecdotally, I frequently hear the testimony of Android and iPhone owners who loved their Nokia phones. If the large base of Series 40 owners have the same sentiment, this Nokia-branded Android smartphone could be a success if it can be priced to attract the price-sensitive feature phone customers, a disproportionate share of whom reside in the developing world. The large-screen Lenovo Qualcomm 8225Q-powered A706 sells for under $200 without a contract, so Nokia should be able to deliver a cost-competitive Nokia Android smartphone.

What happens to the Nokia Android project now that Microsoft owns both the Lumia and the Asha brands? If it is possible to extend the Lumia line down to a price point where it is an upgrade candidate for the Series 40 phones, one would expect Microsoft to cancel the project after the acquisition is completed. It could also sell the Android designs and IP to another company without the Nokia brand name.

But what if there is a marketing or engineering obstacle to building a price-competitive Lumia that is a natural upgrade for the large base of Series 40 phones? Would it be better to keep these customers as Microsoft Android-branded smartphone customers, or lose the customer to another brand?

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