Nokia Shortchanges China Mobile

Smartphone turnaround candidate Nokia (NYSE: NOK  ) made headlines late last year when it said it would bring a variant of its new flagship Lumia 920 to the largest carrier in the world, China Mobile (NYSE: CHL  ) . The Lumia 920T is specifically tailored to the wireless carrier's unique 3G TD-SCDMA network, and China Mobile was even going to subsidize the device to effectively free on contract.

Not what the carrier ordered
According to a recent Bloomberg report, Nokia may be inadvertently shortchanging China Mobile. The Lumia 920T is awfully hard to come by right about now, which China Mobile blames on shortages on Nokia's behalf. A spokeswoman for the carrier said that China Mobile had ordered 90,000 units through Jan. 30, and Nokia was only able to deliver a third of those.

That's left most of China Mobile's retail locations out of Lumia 920T inventory as we head into the important Chinese New Year holiday shopping season. Nokia said it sold 4.4 million Lumia units last quarter, comprising two-thirds of its total smartphone unit shipments. The company also conceded that it was facing supply constraints, and was having trouble keeping up with demand. Those are good signs for Nokia's turnaround that's still a work in progress.

There are plenty of fish in the sea
The problem is that, like all commoditized hardware OEMs, there are plenty of substitutes that prospective buyers can turn to, even within the same software platform. Nokia's fate lies squarely on the success or failure of Microsoft (NASDAQ: MSFT  ) Windows Phone, for better or for worse. Microsoft is primarily tapping three OEMs for Windows Phone 8 devices: Nokia, HTC, and Samsung.

Since Microsoft exerts a lot of control over its platform, unlike Google's (NASDAQ: GOOGL  ) Android mess, Windows Phones are inherently more similar than the wide variety of Android variants. The whole reason why OEMs and carriers like to modify Android is in an effort to differentiate their products, and fend off commoditization. In its quest to preserve the user experience it envisions, Microsoft hinders OEMs' ability to differentiate meaningfully.

HTC's Windows Phone 8X looks nearly identical to the Lumia 920T, and would probably suffice for the average Chinese consumer looking for a new Windows Phone. The 8X is available on all three of China's big carriers, including China Mobile. Samsung's ATIV S, which also runs on the same operating system, was recently cleared by Chinese regulators, although it isn't available quite yet. Here's how the 8X and Lumia 920 compare (the 920T just has a different baseband) in some of the pertinent specs.

Specification

8X

Lumia 920T

Processor

Qualcomm dual-core 1.5 GHz Snapdragon S4

Qualcomm dual-core 1.5 GHz Snapdragon S4

Display size

4.3-inch

4.5-inch

Display resolution

1280 x 720

1280 x 768

Dimensions

132.4 mm x 66.2 mm x 10.1 mm

130.3 mm x 70.8 mm x 10.7 mm

Primary camera

8-megapixel

8.7-megapixel

Sources: HTC and Nokia.

The point is that the differences between these devices in terms of hardware is marginal, at best, and Nokia's supply constraints are an opportunity for HTC to swoop in and win over consumers who are interested in Windows Phone 8. The Taiwanese OEM has fallen on hard times with its Android offerings as Samsung eats its lunch, so it figured it might as well give Windows Phone 8 a try.

The Android rises
If Nokia isn't able to close sales, those buyers are more likely to move on and buy a readily available substitute. One of the consequences of its decision to fully embrace Windows Phone was a major sacrifice in market share in China. Nokia's Symbian platform was once the dominant platform within the Middle Kingdom, and ditching Symbian has hurt its position in China.

In Symbian's place, Android has stepped up to fill the void, and you can see that most of Android's gains in China have come directly at the expense of Symbian. Meanwhile, Windows Phone is still trying to ramp up in China.

Nokia needs to work through these supply constraints posthaste, because otherwise, they're going to be quite painful.

Nokia's been struggling in a world of Apple and Android smartphone dominance. However, the company has banked its future on its next generation of Windows smartphones. Motley Fool analyst Charly Travers has created a new premium report that digs into both the opportunities and risks facing Nokia to help investors decide if the company is a buy or sell. To get started, simply click here now.


Read/Post Comments (7) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 08, 2013, at 8:11 AM, unbiasedjourno wrote:

    I understood short changing someone was to somehow cheat them and to headline a very public supply shortage in this way just shows how unbiased the blogger is.

    Obviously you have something against Nokia to also recommend the HTC alternative and just compare hardware specs. If it was down to hardware specs alone no-one would have bought the first 3-4 generations of iPhone!

  • Report this Comment On February 08, 2013, at 10:19 AM, techy46 wrote:

    Ok a little over 2 months ago you Fools were reporting that Nokia;s Lumia 920 was not in short supply it was a planned shortage by Nokia to increase demand. Now you're complaining that it's a real shortage in China and that's going to sink Nokia. Why don;t you just post apges out of the dictionary to generate clicks?

  • Report this Comment On February 08, 2013, at 2:47 PM, knickers14 wrote:

    Maybe its not Nokia at all. Supposedly HTC had to reduce production of the new M7 from 3 million to 500K due to component shortages.

    As with the Lumia 920, the M7 is rumored to have the Qualcomm snapdragon processor in it also. Not too mention the Nexus 4 which has had a ton of delays in production as well.

    Coincidence, maybe but maybe we should all be yelling at Qualcomm.

    Side note: It will be interesting to hear if this has also effected BBRY since the new Z10 has a snapdragon processor in it too.

  • Report this Comment On February 08, 2013, at 3:57 PM, russ0rex wrote:

    The new Vietnam factory being completed on schedule in April will produce 45 mil devices per quarter.

    ref: http://en.baomoi.com/Home/economy/www.vir.com.vn/Nokia-on-sc...

  • Report this Comment On February 08, 2013, at 7:26 PM, Kingmambo44545 wrote:

    90,000 units doesn't exactly sound like a lot... Shouldn't that be the bigger story here?

  • Report this Comment On February 09, 2013, at 9:25 AM, EddieLomax wrote:

    Sort of wondering where the shortage is as well.

    Qualcomm are definitely getting too critical to Nokia and others, as their profits have gone up 33% its showing they can exercise their monopoly too.

    I do wonder if the camera in the 920 is the key component as well? Just a guess...

    Its all looking like a perfect time for Intel to step into the market with some bold moves, there are good profit margins to be had and if Qualcomm are due to many of the shortages then Nokia and co are going to be desperate here to diversify their devices.

  • Report this Comment On February 11, 2013, at 12:39 PM, ziploc1 wrote:

    This article implies there is little difference between the Htc and Nok cameras. The Pureview camera is definitely better with its image stabilization.

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