In October, Nokia Corp. (NOK) unveiled a pair of Windows-based devices. Named Lumia 710 and 800, the Finnish handset maker’s newest smartphones may be its best bet in its race against Apple and Android devices. Nokia launched Lumia in a partnership with Microsoft in which Nokia agreed to use Windows Phone 7 as its operating system.
“We had to make some hard decisions. The whole market had changed, and we didn’t change fast enough,” said Stephen Elop, Nokia’s CEO and president, during his first visit to Brazil, where the former Microsoft executive announced the local manufacturing of Nokia’s Asha series and Lumia 710.
Elop made it clear that Windows Phone is the OS of choice for Nokia’s smartphones. However, HTC and Samsung also have launched Windows Phone devices. “We differentiate ourselves through content and design,” Elop said.
Although Nokia says more than 1,500 developers are making applications for its phone, the company needs to work closely with its ecosystems to build a huge community. The competition is enormous and increasing.
“I think that the OS is competitive, but Microsoft lacks the sexiness that iPhone and Android have today. Nokia will have to spend a lot of money and resources in its advertising to make Lumia attractive to the young consumers,” said Carolina Milanesi, vice president of research at consulting firm Gartner.
Perhaps a better choice for this delicate moment would be to put much more effort to lead in emerging countries, where Asian products are becoming popular in part because of lower costs. Although such devices are less expensive, “they do not offer the same value for money Nokia can deliver. This plus Nokia’s focus on services and applications will be their differentiator,” Milanesi said.
Indeed, providing feature phones and entry-level smartphones figures among the three main goals that Nokia has defined as its key factors for the near future: Microsoft’s partnership, the next 1 billion people connected and so-called future disruptive technologies. Nokia is looking to the potential market created by the large number of new Internet users who will connect through mobile phones and not via computers.
In emerging countries, the smartphone’s role surpasses those of voice and simple data, such as SMS. These handsets are poised to contribute to the increase in the number of people who have bank accounts and access the Internet.
To play a part in this, Nokia is offering a range of products — including the Asha series — for low-end and high-end users alike. Nokia estimates that there are 3.2 billion people with no phone, 1.5 billion with data-connectable phones, 1.2 billion with no data (SMS only) and 1 billion with data-connected devices.
“We spent a lot of time developing the S30 and S40 portfolios to attend the demand for intuitive user experience, style, innovation and with value-added features, such as dual SIM, easy swap,” said Mary McDowell, executive vice president of Nokia’s mobile phone unit.
However, it is important to understand which segment delivers more revenues, because at the end of the day what counts is whether the company is profitable. “Nokia has always been profitable in the low end as well as the high end. More recently the high end has been suffering due to lack of a strong OS offering, a problem that they are solving transitioning from Symbian to Windows Phone 7. They need the high end to make their brand aspirational so that the low end sells on the back of that success. This was something we were seeing back when the N95 was selling,” Milanesi said.