Symbian -- Its Role in the Mobile Jigsaw
The recent purchase of Symbian by Nokia highlights the tensions around running a consortium-owned platform business. Obviously, Nokia believes that making the software royalty-free and open source is the key to future mass adoption. The team at Telco 2.0 disagree and believe the creation of the Symbian Foundation will cure none of the governance or product issues going forward. Additionally, Symbian isn't strong in the really important bits of the mobile jigsaw that generates the real value to any of the end-consumer, developer or mobile operator.
In this article, we look at the operating performance of Symbian. In a second we examine the "openness" of Symbian going forward, since "open" remains such a talisman of business model success.
Symbian's core product is a piece of software code that the user doesn't interact with directly -- it's low-level operating system code to deal with key presses, screen display, and controlling the radio. Unlike Windows (but rather like Unix) there are three competing user interfaces built on this common foundation: Nokia's Series 60 (S60), Sony Ericsson's UIQ, and DoCoMo's MOAP. Smartphones haven't taken the world by storm yet, but Symbian is the dominant smartphone platform, and thus is well positioned to trickle down to lower-end handsets over time. What might be relevant to 100m handsets this year could be a billion handsets in two or three years from now. As we saw on the PC with Windows, the character of the handset operating system is critical to who makes money out of the mobile ecosystem.
The "what" of the deal is simple enough -- Nokia spent a sum of money equivalent to two years' licence fees buying out the other shareholders in Symbian, before staving off general horror from other vendors by promising to convert the firm into an open-source foundation like the ones behind Mozilla, Apache and many other open-source projects. The "how" is pretty simple, too. Nokia is going to chip in its proprietary S60, and assign the S60 developers to work on Symbian Foundation projects.
The generic problem with consortium is typically not all members are equal and almost certainly have different objectives. This has always been the case with Symbian.
It is worth examining the final shareholder structure which has been stable since July 2004: Nokia - 47.9%, Ericsson - 15.6%, SonyEricsson - 13.1%, Panasonic - 10.5%, Siemens - 8.4% and Samsung - 4.5%. At the bottom of the article we have listed the key corporate events in Symbian history and the changes in shareholding.
It is interesting to note that: Siemens is out of the handset business, Panasonic doesn't produce Symbian handsets (it uses LiMo), Ericsson only produces handsets indirectly through SonyEricsson, and Samsung is notably permissive towards handset operating systems.
SonyEricsson has been committed towards Symbian at the top end of its range, although recently is adding Windows Mobile for its Xperia range targeted at corporates.
Nokia seems almost committed though has recently purchased Trolltech -- a notable fan of Linux and developer of Qt.
The tensions within the shareholders seem obvious: Siemens was probably in the consortium for pure financial return, whereas for Nokia it was a key component of industrial strategy and cost base for its high-end products. The other shareholders were somewhere in between those extremes. The added variable was that Samsung, Nokia's strongest competitor, seemed hardly committed to the product.
It is easy to produce a hypotheses that the software roadmap and licence pricing for Symbian was difficult to agree and that was before the user interface angle (see below).
Ongoing Business Model
Going forward, Nokia has solved the argument of licence pricing -- it is free. Whether this passed to consumers in the form of lower handset prices is open to debate. After all, Nokia somehow has to recover the cost of an additional 1,000 personnel on its payroll. For SonyEricsson with its recent profit warning, any improvement in margin will be appreciated, but this doesn't necessarily mean a reduction in pricing.
It also seems obvious that Nokia will also control the software roadmap going forward: it seems to us that handset operators using Symbian will be faced with three options: free-ride on Nokia; pick and choose components and differentiate with self-build components; or pick another OS.
We think that given the chosen licence (Eclipse -- described in more detail in next article), plus the history of Symbian user-interfaces, and the dominance of Nokia, all point towards other handset operators producing their own flavours of Symbian going forward.
Nokia may have bought Symbian, even without competitive pressures, purely to reduce its own royalties. However, the competitive environment adds an additional dimension to the decision.
RIM and Microsoft are extremely strong in the corporate space and both share two features that Symbian are currently extremely weak in -- they both excel in synchronizing with messaging and calendaring services.
Apple has also raised the bar in usability. This is something where Symbian has stayed clear, but is certainly not one of the strengths of S60, the Nokia front end. The wife of one of our team -- tech-savvy, tri-lingual, with a PhD in molecular biology -- couldn't work out how to change the ringtone, and not for lack of trying. What do you mean it's not under 'settings'? Some unkind tongues have even speculated that the S60 user interface was inspired by an Enigma Machine stolen to order by Nokia executives.
Qualcomm is rarely mentioned when phone operating systems are talked about, and that is because they take a completely different approach. Qualcomm's BREW would be better classified as a content delivery system, and it is gaining traction in Europe. Two really innovative handsets of last year, the O2 Coccoon and the 3-Skypephone, were both based upon Qualcomm software. Qualcomm's differentiator is that it is not a consumer brand and develops solutions in partnership with operators.
The RIM, Microsoft, Apple and Qualcomm solutions share one thing in common: they incorporate network elements which deliver services.
Nokia is of course moving into back-end solutions through its embryonic Ovi services. And this may be the major point about Symbian: it is only one, albeit important piece of the jigsaw. Meanwhile, as we've written before, Ovi remains obsessed around information and entertainment services, neglecting the network side of the core voice and messaging service. Contrast with Apple's first advance with Visual Voicemail.
As James Balsillie, CEO of RIM, said this week "The sector is shifting rapidly. The middle part is hollowing -- there are cheap, cheap, cheap phones and then it is smartphones to a connected platform."
Key Symbian Dates.
June 1998 - Launch with Psion owning 40%, Nokia 30% & Ericsson 30%.
Oct 1998 - Motorola Joins Consortium
Jan 1999 - Symbian acquires Ronneby Labs from Ericsson and with it the original UIQ team & codebase.
Mar 1999 - DoCoMo partnership
May 1999 - Panasonic joins Consortium. Equity Stakes now: Psion - 28%, Nokia / Ericsson / Motorola - 21%, Panasonic - 9%.
Jan 2002 - Funding Round of £20.75m. SonyEricsson tales up Ericsson Rights.
Jun 2002 - Siemens Joins Consortium with £14.25m for 5%. Implied Value £285m
Feb 2003 - Samsung Joins Consortium with £17m for 5%. Implied Value £340m.
Aug 2003 - Five Years Anniversary. Original Consortium Members can now sell. Motorola sells stake for £57m to Nokia & Psion. Implied Value £300m.
Feb 2004 - Original Founder Founder Psion decides to sell out. Announces to Sell 31.7% for £135.5m with part of payment dependant of future royalties. Implied Value £427m. Nokia would have > 50% control. David Potter of Psion says total investment in Symbian was £35m to-date, so £135.5m represents a good return.
July 2004 - Preemption of Psion Stake by Panasonic, SonyEricsson & Siemens. Additional Rights issue of £50m taken up by Panasonic, SonyEricsson, Siemens & Nokia. New Shareholding structure: Nokia - 47.9%, Ericsson - 15.6%, SonyEricsson - 13.1%, Panasonic - 10.5%, Siemens - 8.4% and Samsung - 4.5%.
Agree to rise cost base to c. £100m/per annum and headcount of c. 1,200.
Feb 2007 - Agree to sell UIQ to SonyEricsson for £7.1m.
June 2008 - Nokia buys rest of Symbian with Implied Value of €850m (£673m) with approx. payout of - Ericsson - £105m, SonyEricsson - £88.2m, Panasonic - £70.7m, Siemens of £56.5m and Samsung £30.3m. Note, Symbian had net cash of €182m. The price quoted by Nokia of €262m is the net price paid by Nokia to buy out the consortium not the value of the company.