Nokia has launched its latest smartphones, the Lumia 920 and the Lumia 820, running on the recently announced Windows Phone 8 platform from Microsoft. These two devices are extremely important for Nokia and come at a crucial time. From a design perspective the new Lumia 920 has the same body shape as the Lumia 900 and therefore will not be a breakthrough change on Nokia’s design. It is what comes inside and the latest developments on the Windows Phone ecosystem where the biggest opportunity for Nokia is.
The support for five LTE bands (including 1,800MHz), the integration of the PureView camera technology, the high-definition display, and the dual-core processor, along with other features and a range of accessories for wireless charging, will make it a contender to its competitors, particularly the Samsung Galaxy S III, the Samsung ATIV S, and the expected new devices from Apple, HTC, and Motorola in the coming weeks.
From a hardware perspective the new Lumia 920 can compete head-to-head with any of the current high-end smartphones on the market. The Lumia 820 is also a very interesting proposition in the midrange segment to compete with Android, both in terms of specs and design.
What makes it unique from competitors, however, are the range of services that Nokia developed to create additional value to its clients and to compete with other Windows Phones that will come to market in the next quarters. Nokia Maps is probably the most noticeable service.
The maps offer is a lot more advanced than any the other mobile maps offering on the market, including the coverage on the number of cities, the number of languages, and full offline availability. Nokia Maps will become the standard maps platform for Windows Phone 8 for all OEMs and will be integrated with Bing Maps, which will give the maps a major boost on the information available.
Nokia Transport, Nokia Reading, Nokia Music with Mix Radio — soon available in the U.S. too — and the now announced Nokia Lenses are important services from a standard Windows Phone 8 experience available on other Windows devices.
A number of challenges remain for Nokia, however. The lack of awareness of the OS will continue to be the major problem for Nokia. The support of other OEMs is key, and the latest Samsung vs. Apple lawsuit will trigger the investment and speed up the roadmaps on Windows Phones. More devices from other makers will help Nokia to raise awareness for Windows Phone 8, but it will come at a price.
If Samsung is serious about Windows Phone 8, it will significantly increase its marketing budgets to sell higher volumes than Nokia in the coming quarters. It is therefore important for Nokia to continue leading the Windows Phone volumes. For that needs to make a global launch and not on “selected markets” only. When Nokia WP8 devices come out, Nokia will have to execute its best operational and sales skills ever.
Nokia needs to excel at the point of sale, where the value and experience becomes meaningful to end users. Training programs, retail demonstrations, sales commissions, advertisement, etc. will make the difference. This war will be won by those that implement the best below-the-line activities. The battles will aim to dominate the point of sale. Consumers trust the advice of sales people in shops. Nokia will win when it manages to win sales floor people’s opinions towards Windows Phones compared with Android or iOS experiences.
The next two quarters will define Nokia’s future. The company took a long-term strategy and a bold decision to invest in the new operating system. This is a marathon and will not give Nokia a short-term boost on sales, but it is important that Nokia continues quarter over quarter to grow its volumes steadily.
Its portfolio is right and competitive from a design and specs perspective; the services are available; the company has concluded (or is about to conclude) an important internal restructuring; the OS ecosystem is growing fast; feedback from Windows Phone users is extremely good; and the latest Microsoft announcements on Windows 8, Windows Phone 8 will represent a major opportunity. The time has come for Stephen Elop to prove his strategy was right.
A bit of background and context on the long-term strategy
Over the past two years the company has been through a very tough transition since it replaced its Symbian operating system with the Microsoft Windows Phone. The company did a massive internal reorganization, with thousands of lay-offs, as market share in the smartphone segment continued to dive. In the second quarter of 2010 Nokia’s smartphone unit share was 22%, which went down to 15% a year later — in the latest 2Q12 results, Nokia’s share was 7%, losing two-thirds of its share in two years.
Since the adoption of the Windows Phone operating system, Nokia has been suffering from the lack of awareness that the OS has among consumers, while Google’s Android and Apple’s iOS have been growing fast, to account for 88% of total worldwide smartphone shipments in 2Q12. Windows Phones represented only 3%. It was naïve to think that the adoption of a “new” operating system would turn Nokia’s fortune overnight.
From the start, Nokia was aware of the challenges of growing a fairly new platform among consumers and it did take the appropriate action to adjust the company to the difficult reality of significant lower sales volumes during the transition period. Operators and consumers looked at Android as an alternative to the lack of competitiveness and attractiveness of Symbian in the short term.
When the first Lumia devices came out, Nokia showed its strengths and a new mindset — to regain some of the shine from the past, it would need to be bold on design, develop innovative services, and significantly speed up execution. And Nokia has been doing an excellent job under Elop’s leadership.
To see the results of the new strategy, however, Nokia was, and will continue to be, totally dependent on Microsoft’s ecosystem. On the other hand Microsoft has also been doing a good job. It took a few years to come up with an operating system that would be able to compete with iOS and Android. But the user experience of Windows Phones is now as appealing as other operating systems.
The recently announced Windows Phone 8 and Windows 8 are the next steps in the development of an ecosystem that goes from an isolated to an integrated and shared experience among the different screens — PC, tablet, smartphone, and gaming console. The new Windows 8 ecosystem, which Windows Phone 8 is part of, will provide consumers with a full and familiar experience that will attract them.
To be able to easily share content between devices; to download applications that run on the tablet, smartphone, or PC with no additional effort or cost; to share games from Xbox to the smartphone; and to use Microsoft’s Office applications on the smartphone, tablet the same way and with most of the relevant features that users have on their laptops — this is key for the future of the Microsoft ecosystem. This integration will attract consumers to a familiar world. And this will help Windows Phone 8 and consequently Nokia.
This experience and integration will attract developers and phone makers. The likes of Samsung, HTC, Sony, Huawei, Lenovo, Dell, and Acer are likely to invest more in Windows 8 or Windows Phone 8 as it will allow them to increase their portfolios from a full range — such as the Samsung ATIV portfolio announced last week — to parts of it, such as HTC smartphone and tablet devices.
Smartphone makers face also another threat. The dependency on Android is too risky as Google controls and decides what to do with the OS, which does not necessarily give it a change to define the strategy and roadmap for Android, as it thought when it first embraced Android. Operators also are also looking at alternatives to balance the power of Google and Apple. Not a single operator in the world is happy to see most of its portfolios and sales on Android and iOS.
On top of this, a U.S. court verdict brought to light a very important problem for most Android OEMs: patent infringement. The Apple vs Samsung lawsuit was the trigger to most OEMs speeding up their plans and roadmaps for alternative platforms.
Windows Phones will be the OS that will benefit the most, as players focusing exclusively on Android will now have a reason to look at Windows Phone 8 as an option sooner than they probably planned, trying to reduce the risk of facing similar lawsuits they cannot afford to lose as it may hit them hard financially. Operators will also push manufacturers to develop devices that don’t risk being withdrawn from the market overnight, especially before sales seasons, due to patent infringements.
Ironically the new Windows Phone 8 devices will help Nokia. One of the biggest problems of Windows Phones at the moment is lack of devices available. In the second quarter 2012 there were 120 Android devices on the market (including all different versions), compared to 12 from Windows Phones. Indeed there were more Android devices than all other devices together.
For consumers, choice is important. An operating system becomes more attractive if there are several devices from most of the well-known vendors. As the likes of Samsung, HTC, Huawei, and ZTE launch their Windows Phone 8, consumers will start to question what they can get from the Microsoft ecosystem, and will compare them with the ones they currently use, likely Android or iOS. Nokia is now well positioned to be the preference for Windows Phones, if it executes well below the line, as it has done strategically.