Why Nokia Might Have To Pull Skype Off Phones


Nokia (NOK) raised eyebrows this month when it said that it would start shipping phones with built-in copies of Skype, eBay’s (EBAY) Internet phone software. Now it may have to face the embarrassing task of taking a step back.

U.K. mobile operators O2 and Orange are supposedly “furious” with Nokia’s plans, and may refuse to stock Nokia’s devices if they don’t strip out Skype, MocoNews notes. While Skype requires the device owner to pay for mobile Internet access, it could easily reduce the number of calling minutes someone uses per month — still carriers’ bread and butter.

This seems like a silly fight, because even if Nokia doesn’t ship phones with Skype, it’s still easy enough to install — for whoever is serious enough about using Skype and fewer mobile phone minutes.

But Nokia isn’t exactly in the position to put up a big fight.

The mobile industry is shrinking, and Nokia will be among the hardest hit. In a note today, RBC analyst Mark Sue thinks Nokia’s Q1 device shipments will fall to 85 million units this quarter, down 27% year-over-year, from 116 million phones during Q1’08. Further, Sue thinks Nokia’s mobile phone operating margins could fall to 5%, down from a peak around 20%.