Nokia may not have been worried about a Windows Phone from Microsoft before, but they seem to be preparing for the worst-case scenario now: a Surface smartphone that would go head to head with its Lumia series.
A recent filing with the Securities and Exchange Commission (SEC) finds Nokia formally contemplating the possibility that Microsoft will enter the smartphone market by expanding the Surface line-up with a phone.
"Microsoft may make strategic decisions or changes that may be detrimental to us," read the SEC filing. "For example, in addition to the Surface tablet, Microsoft may broaden its strategy to sell other mobile devices under its own brand, including smartphones. This could lead Microsoft to focus more on their own devices and less on mobile devices of other manufacturers that operate on the Windows Phone platform, including Nokia."
This marks the first time that Nokia is seriously considering a Surface phone as a competitor. Previously, CEO Stephen Elop couched the prospect of a Surface phone with positivity, saying, "It's certainly a stimulant to the ecosystem." He even encouraged other phone makers like HTC, Samsung, and even Microsoft to make Windows phones.
What's more, Nokia acknowledged the possibility that Microsoft could use the success of a Surface phone to lower investment in Windows Phones from other manufacturers, destabilizing Nokia's primary business. The Lumia 920 played a big part in Nokia posting a profit last quarter, and the company is banking on Windows Phones going forward.
"If Microsoft reduces investment in that operating system or discontinues it, our smartphone strategy would be directly negatively affected by such acts," the report read.
At the same time, it's highly unlikely that Microsoft would actually do that. It relies heavily on its relationships with OEMs, and its entry into consumer hardware manufacturing probably won't change that. Even a successful Surface phone launch would probably see Microsoft still support Nokia.
Still, such a development might mean Nokia should consider alternatives in case such an event were to occur.
As for Microsoft, last year anonymous sources told The Verge that a Surface phone would be a "plan B" for the company. The plan hasn't changed today, but Microsoft is in the process of prototyping the eventual design of the device. Whether or not the Surface phone ever becomes a reality is another question altogether, but at this point it's a distinct possibility.
