Will Nokia Have to Split Its Revenues With Carriers?

Seeing how poorly Nokia's (NYSE: NOK  ) earnings have been lately, a change in marketing strategy for the fall release of its newest smartphone, one that runs Microsoft's (Nasdaq: MSFT  ) Windows Phone 8 operating system, may be in order.

Nokia's current sales angle is to take a mass marketing approach: Any carrier that wants to offer its Lumia line of smartphones is welcome to it. The problem has been that consumer interest in those WP 7.5 phones has not been very high, so carriers haven't made much of an effort in selling them. Second-quarter sales have increased somewhat above analysts' expectations but still fell far short of iPhone and Android phone sales.

But the Financial Times is reporting that Nokia has been in talks with mobile operators about a different kind of marketing arrangement. This new plan would have Nokia giving the carrier a financial stake in upcoming Nokia smartphone sales. In return, the carrier would be more motivated to push customers toward Nokia's phones. One of the carriers Nokia is talking to, according to the FT, is France Telecom (NYSE: FTE  ) .

The talked-about arrangement is similar to that which Apple (Nasdaq: AAPL  ) made with AT&T, Verizon, and Sprint Nextel (NYSE: S  ) for the iPhone -- with one major difference. The iPhone has such drawing power that to get it, each carrier has had to sell the iPhone at a loss to entice customers into long-term contracts. In other words, Apple has the carriers essentially sharing their profits with it.

Carriers would certainly like to keep more of their operating margin to themselves, and one way would be to help establish a third popular smartphone ecosystem. Windows Phone 8 could be that system, and Nokia's rumored strategy -- and it is still only a rumor -- could perhaps pull that off.

Unfortunately for Nokia, its fortunes have taken such a tumble recently, this marketing strategy may smack of just too much desperation.

Apple, on the other hand, has enjoyed such tremendous growth that it makes you wonder whether that growth can be sustained. This Motley Fool report lays out what the savvy investor needs to know about this singular company. The invaluable report is amazingly free for the asking! Get it today!

Fool contributor Dan Radovsky has no financial interest in the above-mentioned companies. The Motley Fool owns shares of Apple, France Telecom, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, France Telecom, and Apple and creating bull call spread positions in Microsoft and Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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