During the press conference Elop talked about the difficulties to differentiate on Android and the fact that it might be easily fragmented. Neither does make much sense to me.
How is differentiation achieved with Microsoft? It's pretty much a closed-loop software and services model that let's you deploy and bundle your own apps but in order to stay compatible to the eco-system, you can't really change the core.
Whereas Android would actually allow for better differentiation for two reasons:
a) Internally Nokia already knows Linux (Meego, Maemo) and has resources who could bring qt and other frameworks to android, thus not completely throwing out its existing investments.
b) It could start its own trunk of Android while still leveraging the existing Google ecosystem. Microsoft is playing catchup in this field and Nokia knows nothing about Microsoft.
The fragmentation question is a bit more tricky because fundamentally it is true for every platform: hardware doesn't stand still - so the question is this: do you plan to make use of newer hardware features and introduce fragmentation or do you stop to innovate? I feel that Nokia just entered into the same deal that IBM did three decades ago. Nokia will have to march to Microsoft's tunes and even if they have a great hardware idea, they have given away the opportunity to build their own software around it. We all know what happened to IBM's PC business, it became commoditized and only Microsoft kept its high-margin. In the end all this is good for consumers, at least in the beginning because it will drive costs and prices down - but in the long-term, having a proprietary platform to work with stifles your own innovation.
Of course, Google wasn't around two decades ago and so it is not clear how all this will unfold. But if Nokia wanted to innovate using Android, they certainly could have done it. It just so happens that SonyEricsson is doing exactly that with their new Xperia Play phone.
There is no denying that Nokia squandered all its options (qt, Symbian) and lack of vision and strategy has cumulated to this decision. But one has to wonder if the fact that Elop is ex-Microsoft has something to do with the decision to partner with Microsoft, especially with the rocky past between Nokia and Google.
One thing is for sure, this deal is the saving grace for Microsoft which up until now had nothing in its favor. Even HP is thinking of abandoning the Wintel duopoly and the current cash cow Windows 7 & Office will not sustain the company alone. It is not clear how well Nokia will fare with this - given that it has to tackle a steep learning curve with Microsoft. Only time will tell.