Is Nokia Developing a Phone it Doesn't Fully Support?

Depending on how much stock you put in the words of Eldar Murtazin, you may or may not believe that, in the not-too-distant future, Nokia plans to invest fewer dollars in its newest smartphone. On the surface, this news isn't all that shocking. No product can move high volumes forever, so even if the N9 proved to be a smash hit, Nokia would eventually divest its support for the product and release another phone. That is the cycle of the industry. What's troubling is that this news (assuming it is news; bear in mind that Murtazin's words have yet to be confirmed) comes before the N9 has been given a firm price or release date. This could be a sign that: (A) Nokia has already lost faith in the phone. No matter what happens in the next six months, Nokia knows it can't compete with the next iPhone. It knows that the N9 will not be able to surpass Research in Motion's RIMM best offerings. And it knows that Google GOOG Android is just a few phones away from world domination. With this in mind, how could anyone possibly have faith in the N9? How could Nokia – a company that recently pledged its support for Windows Phone 7 – believe that the N9 will do anything except waste company resources? (B) Nokia is merely releasing the phone to save face until it has a more substantial product to launch. Over the past few months, Nokia has received a ton of bad press. While Q1 earnings were strong enough to add 4.54% to Nokia's shares in April, the company continued to struggle, prompting speculation that the firm would sell its cell phone business to Microsoft. That last tidbit reminds me of a joke Jay Leno told in 2004 after Toys ‘R' Us announced that it might sell its toy store business. “What are they going to call themselves now?” Leno questioned. “We Was Toys?” The same could be said for Nokia. While the organization has transformed itself before (Nokia reportedly started in the 1800s as a paper company), most people think of the firm as a cell phone manufacturer. Further, if Nokia really plans to get out of the cell phone business, why release the N9 at all? (C) Nokia is hoping the N9 will be enough to silence critics and worried investors until Microsoft MSFT or some other entity makes a significant buyout offer. Even if Nokia chooses to maintain its cell phone business as is, the company still needs to silence (if not surprise) its critics and provide some relief to investors, who must be horrified by the prospect of another failed product launch. And if the company is hoping to sell, Nokia's lineup (which currently consists of the N9 and a soon-to-be-announced Windows Phone 7 device) could be the one-two punch that's needed to persuade a buyer. (D) The N9 has been ready for months; killing it off now would cost Nokia buckets of cash. Considering the order of events (the Microsoft partnership was announced in April, the buyout rumors started in May, and the N9 was announced in June), it seems likely that the N9 was developed several months ago. Otherwise Nokia could have scrapped the project and pushed ahead with Windows Phone 7. Tax write-offs and other benefits allow – and sometimes encourage – companies to abandon a project during the development phase. Thus, it appears as if the N9 was too far along for Nokia to walk away.