An example of what a Surface Phone might have looked like. Image credit: Jonas Daehnert (deviantART)
Microsoft and Nokia need each other more than you'd expect. While Nokia was testing Android in a variety of different ways, Microsoft was busy experimenting with a Surface Phone. Sources familiar with Microsoft's plans tell The Verge that the company built a number of prototype devices to test the viability of such a phone. We're told that Terry Myerson, who now heads the Windows, Windows Phone, and Xbox operating systems, was in charge of the secret Surface phone project. The company had originally considered the idea of its own phone devices as a "Plan B" if Nokia wasn't successful with Windows Phone.
Nokia's Windows Phone dominance worried Microsoft
Nokia now dominates Windows Phone. The Finnish company has secured over 80 percent of all Windows Phone marketshare, a statistic that concerned executives in Redmond. Instead of an ecosystem of partners using Windows Phone like they do Android, Nokia has been the sole dedicated handset maker. HTC tried its own unique partnership with Microsoft with limited success, and Samsung has not seriously committed to its own devices. Microsoft faced an uncertain Windows Phone future if Nokia pulled out of the deal.
While Microsoft was busy experimenting with concepts for its own hardware, Nokia was also building its own Android devices. The New York Times reported details of one particular project today, but there were more. Sources familiar with Nokia's plans say the company was growing increasingly frustrated last year with Microsoft's work to push Windows Phone to lower price points. An effort codenamed "Tango" resulted in cheaper handsets with low specifications, but Nokia needed more.
A Nokia Android device for the low-end
One particular project in testing was codenamed "AOL" according to insiders — "Asha on Linux," a reference to Nokia's low-end line of devices that don't run Windows Phone. Nokia uses a variety of codenames for projects, but this particular one — also codenamed "MView" for Google's hometown of Mountain View — was designed to use a variant of Android on a low-end handset to maximize margins. We're told the end result was planned to launch in 2014, but with the recent acquisition employees working on the projects do not know their fate. One of Nokia's ideas was to fork its own version of Android in a similar way to Amazon for low-end devices.
But Nokia's experimentation with Android was not limited to the bottom of the line: the company was also testing Google's platform on its mainstream Lumia range to hedge against the possible failure of Windows Phone. Microsoft became aware of that particular effort, but as the testing was early on in the Windows Phone partnership, it's not believed that it contributed to Microsoft's decision to purchase Nokia's device business.
In all likelihood, the acquisition means that Microsoft will shelve two projects that were considered "nuclear options" in their respective businesses: Myerson's Surface Phone and Nokia's array of Android initiatives.