Microsoft and Nokia Ready to Change the Game

When well-known entities like Nokia  (NYSE: NOK  ) and Microsoft (NASDAQ: MSFT  )  hitch their respective wagons together, there's bound to be high expectations. In this instance, with its steadily declining market share, Nokia literally put its corporate life on the line with the introduction of its high-end Lumia 920 running Microsoft's Windows phone OS.

Microsoft has a lot of skin in the game, too. Widely criticized for showing up to the mobile computing party late, the success of Nokia's Lumia would go a long way toward easing the concerns of Microsoft investors. Now, with plans to introduce a Lumia in the $150 range, sans a subsidy mind you, Nokia and Microsoft just took a major step in the right direction.

Nokia's market share decline
It's no surprise that Samsung continues to lead the global mobile phone sales race, as it did, again, during the first quarter of this year. According to research conducted by Strategy Analytics, Samsung stretched its lead in Q1, selling a whopping 106.6 million phones; up from a mere 92.5 million last year. Samsung's gains are coming at the expense of Nokia, among others. Though Nokia remains the number two mobile phone seller worldwide, its market share declined to 16.6% in Q1, down from 2012's 21.9%.

Before Nokia fans lose sleep over the downward trend in unit sales, there are a couple of factors worth considering. First, with Nokia's transition to running Windows OS, its old-school symbian OS phones were always going to take a sales volume hit -- that's not a surprise. Also, new phones running a brand new OS takes time to gain sales traction, and for Nokia watchers, there are some positives. Nokia's recent quarterly sales of 5.6 million Lumia's in Q1 came on the heels of the prior quarter's 4.4 million.

Another factor impacting the success of the Microsoft/Nokia partnership is the market that the Lumia targets: the high-end smartphone user. Apple dominates with its iPhones, particularly in the U.S., and, of course, Samsung is no slouch either. Apple's 43.7% share of the domestic smartphone OS market is a big mountain for upstarts like Nokia to climb. But the latest domestic OS numbers aren't all bad for Nokia and Microsoft, as this recent article indicates. With 5.6% of U.S. smartphones running Microsoft's OS, much of which can be attributed to Nokia, it's certainly trending in the right direction.

The Lumia 521
The latest Lumia phone with a Windows 8 operating system could prove to be a windfall for both Nokia and Microsoft. While the Lumia 920 directly competes with Apple's iPhone and the high-end Galaxy, the Lumia 521 is whole new ballgame. Early results from last week's Home Shopping Network (HSN) indicate sales are good – the 521 sold out – and reinforce the notion that there's a market for inexpensive, feature-rich smartphones that don't require costly, multi-year data contracts.

News that Wal-Mart will begin selling the Lumia 521 this month for less than $150, and package it with a $30 a month unlimited text and data plan from T-Mobile, give Nokia and Microsoft investors plenty of reasons to get excited. As the head of Windows phone unit Terry Myerson put it: "There is an opportunity for us to offer a very high quality device in the mainstream. That's where we've made progress in the last couple of months and it's a strategy we'll continue to explore in the United States." And what's good for Microsoft's Windows phone OS is good for Nokia. With an 80% share of all Windows phone OS sales, Nokia blows HTC (another manufacturer with Windows OS phones) out of the water.

The mid- and low-end feature-rich phone market has a huge upside, and not only in emerging markets starved for mobile and smartphone alternatives that won't break the bank. U.S. consumers have gotten spoiled with subsidies bringing the cost of smartphones down to manageable levels, but that's not the case in many international markets. And if T-Mobile USA's shift to selling non-subsidized phones takes hold, options like Nokia's Lumia 521 could fly off the shelves.

It's just one phone, but the Lumia 521 could change consumer's expectations going forward. If you're sitting on the fence wondering whether Nokia or Microsoft warrants your consideration, the Lumia 521 is one more reason to answer "yes."


Read/Post Comments (9) | Recommend This Article (9)

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 May 04, 2013, at 8:00 AM, lee654 wrote:

    Great article. I fully agree. Long and will buy more of both stocks. These are two great companies that has stood the test of time. My predictions, Nokia will be number one again with Smartphones and other mobile devices throughout the world. To all enjoy the ride and take it," One Day At A Time".

    I just finished a movie script by the same title, the life story of Cristy Lane . Free gift to all, at Cristy Lane LS

  • Report this Comment On May 04, 2013, at 8:09 AM, Carolinastallion wrote:

    Microsoft has been gouging people for years with astronomical prices on all their software. In this race .....Microsoft is finished and they will take with them any brand chooses to partner with them. I loved my old dependable Nokia phones with their excellent signal reception. Nokia should steer clear of Microsoft and stick with developing a highly responsive Android based Internet phone. We want the world at our fingertips and we want it now.

    My old Droid X phone is a very slow dinosaur compared to my wife's Samsung Galaxy Note II and I envy her. Our economy is in the crapper and has me on the move all day. I need speed, dependability, and ease of access from my smart phone. Does Microsoft's Windows 8 based phones have all the things? Lol..... I don't think so! Nokia should stick with what works for them....Dependability. Go with Android for ease of access, and focus all they have on SPEED : )

  • Report this Comment On May 04, 2013, at 9:28 AM, Hjin wrote:

    Carolinastallion, seriously? Android is stable? Android is dependable? You are out of your mind. I have yet to own an android device that didnt crash at least twice during a day of use. Android is full of security loopholes. Especially if you use NFC and mobile wallet, thieves can steal all your personal info wirelessly without you knowing.

  • Report this Comment On May 04, 2013, at 9:28 AM, Hjin wrote:

    Even Samsung is moving away from android and toward Tizen.

  • Report this Comment On May 04, 2013, at 9:49 AM, jeffreber44 wrote:

    Windows on my Nokia Lumia is fantastic. I wouldn't switch back after using this phone.

  • Report this Comment On May 04, 2013, at 12:39 PM, subbywrx wrote:

    Nokia and Microsoft will NEVER have the best smartphone, EVER. I don't know what they're thinking but it's not logical. I had a windows phone, what an embarrassment, the Samsung BlackJack SGH-i607, total garbage. I'll stick with my Samsung Galaxy s3 for now.

    For all that think Nokia is going to be #1 (with Microsoft) are in a dream world.

  • Report this Comment On May 04, 2013, at 3:38 PM, runningfool23 wrote:

    subbywrx-

    "...the Samsung BlackJack SGH-i607, total garbage. I'll stick with my Samsung..."

    This makes sense. I mean, i make all my consumer decisions based on products from 7 years ago, particularly in the technology sector. The windows 5.0 operating system was awful, so the 8.0 must be as well.

    ...And you're basing your opinion of Nokia on a Samsung phone?

    "NEVER"...?

    http://www.engadget.com/2013/02/20/winners-2012-engadget-awa...

    Nokia probably won't be #1 in terms of smart phone market share anytime soon, but they are making steps to be in the mix of things.

  • Report this Comment On May 05, 2013, at 11:44 PM, ctyank99 wrote:

    The HSN sale, I watch because I saw a Nokia phone and WP 8 OS, sold out quickly!!!! It certainly looked like a nice phone, especailly for the money. Let's face it... Nokia just recently started selling the Lumia line. Now they are starting to get pick up by all the big relealiers inluding; AT&T, Verizon, T-mobile, Wal-Mart and sales should take off. At least that's what i'm betting on...

  • Report this Comment On May 06, 2013, at 12:03 AM, ctyank99 wrote:

    One more thing... Microsoft needs to do more to sell Nokia and WP8... "the wedding fight" AD is a good example. That ad was excellent... MS needs to do more!!!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2408271, ~/Articles/ArticleHandler.aspx, 9/23/2014 8:48:37 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement