Microsoft's Aaron Woodman talks about Windows Phone 7 and Nokia

We sat down for a few minutes with Aaron Woodman -- director of Microsoft's mobile communication business -- here at Mobile World Congress this week to talk about the past, present, and future of the Windows Phone platform. Of course, it was at this very event a year ago when Redmond first unveiled its next-gen smartphone play, so this marks a great opportunity to circle back and see where the company has been -- and naturally, the Nokia news casts a bright new light on the platform. Read on for the full interview! 

Chris Ziegler: I wanted to talk a little bit about this issue of scale, because Stephen mentioned that a little bit the other night -- the fact that they bring so much scale to your platform that you have not had in the past. But that's interesting on a number of levels, because Samsung does have scale, right? Samsung has a lot of scale.

Aaron Woodman: Sure.

CZ: So I'm wondering first of all, what does this mean for the level of commitment that you're seeing from other OEMs, and what does it mean for the future of their levels of commitment? Because, you know, I'm thinking about it, and I'm sure that the way it's being spun is not this way, but it seems to me that if I were Samsung or HTC and all of a sudden I was selling phones that were infused with Nokia services, I would be really uncomfortable, right? So what's your take on that?

AW: Well, there's a couple of questions there. How important is scale, just generally -- and the second question is, I guess, does that scale that Nokia provides impact your current relationships for your OEMs. And then ultimately, the services and those types of things that they do provide that might be enabled by Nokia-based assets like Navteq. So is that fair?

CZ: Yeah, absolutely.

AW: So for me, I'll answer the first question -- scale is super critical. You know, in this business, it's one of the reasons that I think makes it so attractive to Microsoft. The requirement to compete in mobile phones today is enormous. The amount of assets, the amount of R&D you have to do, the competitive nature of the product features and functionality, the roadmaps people get, what consumers expect are incredibly high. And that actually makes it one of those businesses where very few people can compete. You know, it's not like you can come out of the woodwork and actually compete in this space -- I think it just requires too much in order to do that. So that's what makes it attractive, it's one of the things that ultimately... it's why Microsoft's in the business, and Nokia really helps us accelerate scale. And it's partially because of their commitment -- their desire to really make a bet and take the best of their innovation and apply it against the Windows Phone space. And I think that along with their natural market momentum will be very positive for Windows Phone.

I also think, when I think about how that impacts our other relationships... you know, I can't speak for Samsung, but what I can tell you is that Samsung wants to sell phones. And when I think about in today's market what's required to sell phones -- things like great services, or even apps -- if you just say "apps" as a basic category requirement today, the one thing that's going to pull, or like create a vacuum in for apps is scale. If you ask an ISV, they don't have any single passion about a platform, they have a passion to find customers. And that's what makes it so appealing. And so one of the benefits that everyone will get from the ecosystem is when you apply scale to the ecosystem, everyone that needs scale to create market opportunity will benefit once that's achieved. And so Samsung will have more apps on their phone because of scale Nokia provides. I think that's beneficial.

I also think that if you asked... you know, if you took one of the other ecosystems like Apple, which is a very exclusive ecosystem -- no one can make hardware. If someone approached another OEM like, say, Samsung or HTC or Motorola or whoever and said, "hey, we're open -- if you want to make an iPhone, go ahead," my bet is they would do it. And they would do it primarily because consumers have demand. And Samsung is an amazing company. I don't think they're shy to compete with Nokia -- they do it today. Alright? I don't think they're shy to compete with Apple on hardware design, they're an incredible company. So I don't think this shifts the boat in terms of their competitive buoyancy.

So I don't know how those relationships will work out, but we have a very good working relationship on both an engineering side and a marketing side with each of those OEMs, and I expect that to continue. And I really do expect them not in a hand-raising position, I think scale will benefit.

CZ: And just to make it crystal clear -- I don't think that anyone has really, at least in none of the answers I've heard this week, there haven't really been any head-on answers to this question -- there will be no preferential treatment given to Nokia in terms of the level of customization that they can apply to their devices. Is that correct, or no?

AW: So it's an interesting question -- you say, like, preferential treatment, so say more about that. Is that like oh, they can modify...

CZ: They can do more. They can do more than Samsung or HTC, for example.

AW: I don't think we know, to be honest. This is where, at the end of the day, there are some principles we believe in in the platform. You know, things like we don't want to fragment the platform. We believe that we have to be whole. We believe performance and quality have to be high, so we've done things like chassis strategies and really been specific about the spec. One of the things is that working so closely with Nokia against their innovation and our innovation roadmaps gives us an opportunity to line those up in a much more aggressive fashion.

And so, could we support new things that we don't support today because Nokia has some opportunity to push in a unique way? Yeah, you know, it's not clear whether we make that available to other OEMs in that case. I just don't think we're at a point where that's known. So I don't think it's a question of, like, you know, we're trying to spin ourselves out of it. I think it's, hey, we've been working on this deal for several months, we've agreed on a principle level where we think our business objectives are in alignment, that the complimentary nature of our skill sets and expertise is very, very high. Like, you look at Navteq. We have worldwide services. A place where we're weak worldwide is maps. We have an incredible -- we both have incredible brands, but not in competing ways. It's not like, people are like, where's that Microsoft phone?

But in terms of customization, how that plays out, I think it's really unclear. We actually allow for customizations today that are exclusives to each of our OEMs. Like we worked closely with LG on their DLNA application that's only available on an LG. So it's kind of unfair to say we don't do customizations with each of the OEMs to help them differentiate through software. And then the question is what we do with Nokia and if that's a build or not, I just don't think it's known.

CZ: Okay. So, just to phrase it a slightly different way -- and I might get the same answer -- but to take it in a different direction, would it be conceivable that you would offer specific chassis or versions of Windows Phone 7 designed to run on particular chassis only to certain OEMs, whether that be Nokia or someone else?

AW: Yeah, you know, I don't know. So you're saying, like, would we do something specific at a hardware level. Let's say, I don't know, a different aspect ratio or something?

CZ: Sure.

AW: Yeah, I don't know. I think that we're motivated to sell a lot of phones, I think Nokia is, I think all of our partners are. We have conversations on an ongoing basis about how do we make the chassis specs and strategy both meet our principles around what we care about consumers and help maximize both their ability to be differentiated as well as reach customers through price points. So it's an ongoing discussion. And so I don't know. I don't know if one of the things we would do with them or not would be, hey, I get access to this specific chassis feature. I don't think we know.

CZ: Okay. And one of the reasons I'm so interested in that is that, you know, I think Nokia was on the verge of making a real breakthrough with just how low they were able to push their bottom-end specs on Symbian devices and really commoditize the smartphone in a way it hasn't been commoditized yet. And with Symbian going away, the question becomes, are they going to lose that opportunity? And as Windows Phone stands today, the answer is yes.

AW: Hmm... it's not...

CZ: I mean, as it stands today, Snapdragon... with that one chassis.

First of all, S40 isn't going away any time soon... it's a great product.

AW: Yeah, so here's what I would say. First of all, S40 isn't going away any time soon. They're going to continue to make... it's a great product. So like, that's really where they're hitting those price points more than anything else. So you say, how many years will that continue? Well, I think a lot of that will be determined by the flexibility and changes and ultimately the cost curve that you see against hardware.

You know, one of the benefits of selling a lot of phones is you can also maximize your supply side value chain. You know, you can put pressure on suppliers that are actually providing chips and memory and those types of things. And it's in their best interest because overall they're going to make more money because of the volume. And so Nokia gives us that opportunity to apply pressure against supply chains -- specifically their supply chains -- in a way that we expect to have more flexibility in terms of price points. And we'll continue to work with them to help them do that. I think, you know, at the end of the day, we have the desire to make a really, really cheap phone that meets our quality. So, I think from a principle perspective we want to sell great phones at good prices, and Nokia shares that, and then they bring the ability to provide volume and work the supply side economics, and I think that'll be meaningful.

Do I think that tomorrow we'll have a $100 BOM smartphone? No. Do I think we can get there over some period of time? Yeah, you know, I think we can find ways to do that together by maximizing what we're both capable of doing within the ecosystem.

CZ: And price point aside, how much lower -- how much room do you have to reduce the minimum spec in Windows Phone 7? At MIX last year, you first mentioned the lower-res display that would happen at some point, but beyond that, are there any other places where you would definitely be willing to compromise or move down?

The idea is not to stay at this chassis, the idea is to stay at this quality and this experience, and so we're constantly evaluating our ability to do that.

AW: "Compromise" is an interesting statement, you know? We're constantly evaluating different chipsets and different speeds and different memory speeds and those types of things, and I think you'll see us continue to evaluate that. I would be surprised if we had news for that in this year. Not specifically to Nokia to be honest -- just working through OEMs, we haven't really finished taking feedback and taking action on that. The idea is not to stay at this chassis, the idea is to stay at this quality and this experience, and so we're constantly evaluating our ability to do that.

CZ: So that sort of leads into the other end of the spectrum, which is more modern chassis specs?

AW: Modern? Our specs are really high-end specs!

CZ: No, they are, they are. But when you talk about the "three-horse race..."

AW: I love that you've already said that.

CZ: You know, Android is... it might be in danger of burning itself out here. Well, that might be too strong of a statement, but what I mean is that it does feel like it's a pissing contest between manufacturers in some respects.

AW: Yeah.

CZ: And it's obvious that you're not playing that so far.

AW: Yeah.

CZ: And I know that you've mentioned on many occasions in the past that it's more about the experience than the actual line-item specs. But do you see specific areas where you're saying, yeah, you know, it's time to bump that. We can take advantage of this extra horsepower.

AW: Yeah, you know, I think that part of it is around maximizing -- I don't want to overuse the word "experience," but like I'll use the news that we announced today around IE9. Like, today we have a browser that's a pretty good browser based upon a number of facets within the company. But we announced today that we're bringing IE9 directly over, and we're going to leverage the local GPU to actually do some of the hardware acceleration within the browser. That's pretty powerful. We required the GPU though primarily to meet the requirements we had around games. Specifically XNA titles for Xbox Live. So we have those capabilities within the phone, and I think we can continue to maximize the current capabilities to get more production out of them, more performance out of them. So I look first and I say, you know, there are things we could do even today better and faster given the current chassis spec.

So you know, it's not "next year, we need X," it's more of a, "in five years we agree that we're here, in eight years we agree that we're here."

You know, in terms of, hey, what does the world offer in the future and how do we actually start to ingest those things... I don't know how fast we'll actually be against that. That's another area where you look at Nokia as having some much better hardware -- like we have no hardware planning expertise, so we're kind of working through with our partners in terms of what they want to do and Nokia has much more ability I think to have a better long range planning in terms of hardware capabilities and so we can do joint planning. So you know, it's not "next year, we need X," it's more of a, "in five years we agree that we're here, in eight years we agree that we're here." And that's the type of planning you need from a hardware perspective, and I think they'll bring that to the table and I think it'll actually help.