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Nokia and Symbian to become one; royalty-free, open source roadmap

Andreas Constantinou · June 24, 2008

[Nokia celebrates Symbian’s 10 year anniversary with an acquisition and a royalty-free, open source roadmap for S60. Research Director Andreas Constantinou distills the ramifications of this major industry announcement]

ShoelacesIn typical British style of understatement,  Symbian announced the Symbian Foundation in celebration of the company’s anniversary since its foundation in 1998. Exactly ten years later, having shipped 200 million devices across 235 models from the top-5 OEMs and built an ecosystem of 4 million developers, Symbian now undergoing a major transformation process.

The facts
Nokia is to acquire Symbian Limited with closure expected by the end of 2008, subject to regulatory approval. On closure, all Symbian employees will become Nokia employees.

Nokia will be spending  EUR 264 million to buy the remaining 52% of Symbian shares from Sony Ericsson, Ericsson, Panasonic, Siemens and most likely Samsung. This is about 2.5x of what Nokia paid to acquire Trolltech and about 20x less than what it paid to acquire Navteq.

Symbian makes about GBP177 million a year (calculated as 7% increase over 2006 revenues, in line with 1H07 y-o-y growth), so in Nokia’s share offer, Symbian was only valued at just over two times its annual revenues (!). [Updated: ARCchart has a good analysis of how Symbian’s valuation has remained pretty much constant of the last 5 years despite have shipped its OS on 200 million devices.]

– A new, complete operating system is to be formed by merging Symbian OS and S60 in 1H09. Sony Ericsson and Motorola intend to contribute technology from UIQ, while DoCoMo intends to contribute MOAP-S assets (the Japanese flavour of a Symbian-based application platform).

– The platform will be managed by a new entity, the Symbian Foundation. The foundation will be formed in 1H09 from Nokia as well as several partner OEMs (Fujitsu, LG, motorola, Samsung, Sony Ericsson), network operators (AT&T, DoCoMo, Orange, T-Mobile, Vodafone), hardware platform and chipset vendors (Broadcom, Ericsson, Freescale,  ST, Texas Instruments), system integrators (Digia, Teleca, Wipro), content providers (EA Mobile) and software vendors (PlusMo).

– The Symbian Foundation platform will be available a royalty-free license to all foundation members – starting in 2H09 and to be completed in 1H10

– Platform assets will be available  under an open source license gradually over the next 2 years, with the intent to use the Eclipse Public License (EPL) 1.0. EPL is a weak copyleft license which means that source code modifications/derivatives created must be published if distributed but can be combined with proprietary software. There is also an explicit patent grant in the EPL which implies that IPR-encumbered code from third parties is unlikely to find its way into the Symbian Foundation platform.

– The foundation will operate as a meritocracy. Device manufacturers will be eligible for seats based on number of Symbian Foundation platform-based devices shipped, with the other board members selected by election and contribution.

– The foundation will provide a single point of access for developer support, offering SDKs, documentation, samples, knowledge base, application signing and tech support

– The Symbian Foundation platform will be backwards compatible with Symbian OS 9, S60 3rd Edition. Note that this backwards compatibility warranty isn’t offered by either Android (which may suffer from fragmentation by design) or by LiMo (which effectively standardises middleware and kernel, less so the application environment)

– The foundation will be open to all on a low $1,500 yearly fee from 1H09. Being a foundation member gives you rights to access, modify and contribute foundation source code, access meeting minutes and documents, participate in working groups and annual member meetings.

What this means for the industry
So what does this mean for the mobile industry ? The repercussions of this announcement are rather disruptive:

Nokia will increase its control over Symbian OS, not through ownership, but through the governance model of the Symbian Foundation the sheer weight of its contributions (an estimated 1,000+ Nokia engineers working on the S60+Symbian OS). Previously Nokia was shipping around 70% of Symbian-based devices, but only had just under 50% of ownership. Share of shipments and control (board seats) are now aligned. [update: Nokia gets only one board seat out of five manufacturer seats initially – board seat assignment is volume based and this allocation may change long term. In effect control comes not through board seats, but through the weight of Nokia’s engineering efforts and share of code contributions relative what other OEMs can dedicate to the project.]

– This is a logical move for Symbian, which was crippled without control of the UI, application stack and the core OS under the same entity

– The current Symbian OS license will be extremely simplified into EPL, a popular weak copyleft license that’s been tried and tested across 10s of commercial projects by the Eclipse Foundation.

– Sony Ericsson and Motorola (whatever its fate is) should be adopting S60 and dropping UIQ. That’s a major change, especially for Sony Ericsson who had built 6+ current phone models on UIQ. It’s also a sign for lay offs at UIQ who had been building a team of nearly 400 people in Ronneby and Budapest [update: UIQ will be laying off 200 out of 375 staff]

– DoCoMo should be replacing MOAP with S60, again a major undertaking for Fujitsy, Sharp and Mitsubishi who had shipped over 60 models to date on MOAP.

– Unlike LiMo, the Symbian Foundation will be controlled by a single player, Nokia, based on the weight of its code contributions its ownership of Symbian and the shipment-based assignment of board seats. This governance model is effectively similar to the Open Handset Alliance which is controlled by Google and the WebKit browser core development, which is owned by Apple (although the underlying mechanisms are quite different)

– Windows Mobile is the only licensable OS for mid/high-end phones which doesn’t have a consortium-based contribution model and an open-source-like license (apart from selected parts of the Windows CE kernel source code which are under varying Shared Source licenses). I would expect Microsoft to react in the next quarter by open sourcing more of Windows Mobile

– If Android signalled the commoditisation of the mobile operating system business, the Symbian Foundation platform is the nail in the coffin. This will make things rather challenging for many Linux stack vendors (especially those targeting the smartphone market) who charge on a royalty basis. I expect to see revenue models move towards professional services fees from certification, customisation and productisation (see earlier post on open source business models).

What triggered the disruption
The announcement surprised almost everyone in the mobile industry. It was hard to predict, but is not too hard to rationalise. It may be argued that there are two reasons for Nokia’s acquisition and open source roadmap:

Firstly, as a royalty-free, open source licensed OS, Android was too hard to resist for any OEM. Nokia’s acquisition of Symbian is essentially the answer to Android, resonating the same core principles which are
a) royalty-free
b) open source licensing for pooling costs of maintaining a commoditising OS and
c) majority ownership by a single player

[Update: Nokia (via Michael Mace’s blog) clarified that they only own one board seat out of 5 OEM seats in the Symbian Foundation. Which implies that Nokia would have comparatively little control over the Symbian Foundation – however in reality Nokia will be dedicating an estimated 1,000+ engineers to the S60+Symbian project, far more than any other OEM can, in effect biasing the roadmap of the OS towards its own agenda. This works in much in the same way that Apple control open source browser project WebKit.]

Secondly, Motorola was bleeding heavily in a financial sense and so it would have been keen to sell out its UIQ shares, which Sony Ericsson could not assume the burden of as UIQ was a long way from being profitable. With UIQ out, S60 was the only Symbian-based alternative for Sony Ericsson and a strategic choice in keeping Google from becoming the Android-inside of the mobile industry.

First reactions
The Nokia+Symbian disruption is now creating three centres of gravity around licensable mobile software: LiMo, Android and the Symbian Foundation (one could also add Qualcomm BREW for specific markets). Besides layoffs at UIQ, the repercussions to the industry will be far-reaching, but the full story will take time to unravel – after all the first Symbian Foundation devices are not expected until 2010.

Interesting times indeed!

– Andreas

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