The reality is that Nokia is in serious trouble, something that CEO Stephen Elop seems to understand from the briefing he sent round his firm. It's not so much that Nokia don't sell phones anymore; over a quarter of all phones sold are still Nokia's. Nokia's trouble is that their brand has almost no cachet left. They make generally decent hardware, but their software is nothing short of awful. The N97 was to have been their flagship device in 2009, but it was another example of Nokia being left behind - not understanding the innovation of its competitors. The UI was frankly terrible, as this YouTube video shows. Some talk of Nokia's huge usage in developing markets. This is a dangerous game to play - you either assume that Nokia can churn out high-volume, low margin phones better than Chinese/Indian competitors (they can't), or that such markets will migrate to higher-end phones and then buy these from Nokia (they won't).
Nokia haven't really gone anywhere in developing their software, and worse they've showed signs of panic. They set up the Symbian foundation to develop the operating system used by their higher-end phones, declaring it a body of open source excitement in February 2010. They then brought it back in house nine months later. Nokia claimed the N8 (another attempt to get touchscreens right) would make it all right again. It didn't. The hardware was good, the software lousy as ever.
Oddly, the coverage of the decision on Friday to jump on board the Microsoft ship largely focused on whether this was the right idea, and on how bold Mr Elop had been. Often a few half-truths about Android, Google's open-source phone operating system were thrown in. The Economist duly obliges, writing an article that implies Windows Phone is the only option, and that Android would require Nokia to use 'Google’s mobile services and advertising'. This isn't true of course - Android is open source and Nokia can include, or not include, what they like with it (and Google Maps and Mail are already available for Symbian devices).
To lay this author's cards on the table: I used to love Nokia - they did once make great devices and it brings me no pleasure to see them flounder. However, Android is a very impressive phone operating system and Windows Phone 7 was the wrong way to go. There are two very quick reasons why Windows Phone is not the right choice for Nokia. Firstly, Windows is not a brand that consumers want to purchase. Windows is fine for home PCs - in fact Windows 7 is extremely good, but the very reason Microsoft picked the Windows brand for its mobile OS was to attract business users, who might mistakenly believe that having a Windows network at work and a Windows network on work phones would all work together beautifully. RIM (makers of the Blackberry) have shot right through that, and shown that what matters is good software, not a familiar brand. Consumers do not hanker for a Windows phone, or a Nokia phone. A Windows Nokia phone is no more appealing.
Secondly, there is little that Nokia can do to differentiate itself from other manufacturers of Windows Phone 7 devices. This has been said to be true of Android, but quite simply this isn't true. Good design has put some companies above others - HTC and Samsung make good Android devices, and Motorola's fortunes have rebounded because they have used Android well. Again, Android is open source. Nokia were free to add features as they saw fit to customise the OS and bring customers with them. Windows Phone 7 is a more closed system, and Nokia will most definitely play second fiddle to Microsoft in proposing changes. The attraction of Ovi Maps is not an attraction at all - most users have never heard of Ovi Maps and don't care to - how many people can you say this is true for with Google Maps?
Nonetheless, this decision is not the worst part of what was announced on Friday. The real problem was the indecisiveness. Nokia isn't having troubles with software - it's just plain bad at it. It does make sense to outsource development of the core operating system (if not all applications) to a more knowledgeable and proficient company. This is not what Nokia are doing. Here is their own graph: