Nokia and Microsoft: Oh, So Close!

The party's over in Abu Dhabi. Nokia (NYSE: NOK  ) closed the doors on its annual Nokia World event after unveiling several new devices and an expanded menu of apps for its -- and by extension Microsoft's (NASDAQ: MSFT  )  -- new mobile devices. There wasn't much in the way of surprises; most Nokia fans were expecting a smartphone or two, phablets, and its first foray into the tablet market.

Unfortunately, Nokia didn't know when to say enough was enough. After announcing that Instagram was (finally) coming to its Windows Phone OS slate of mobile devices, introducing a host of new apps utilizing its high-def imaging and map capabilities, along with a slew of games, we got what amounts to a Microsoft RT tablet: Ouch.

First, the good news
As expected, Nokia followed up Microsoft's recent announcement that its Windows 8 OS update supports larger mobile device screens with a new phablet. Actually, make that two new phablets. Nokia, unlike chief smartphone rival Apple (NASDAQ: AAPL  ) , has nothing against the low-end hybrid smartphone market, and proved it once again by offering users two phablets with six-inch screens -- the Lumia 1520 and Lumia 1320.

The Lumia 1520, Nokia's high-end phablet, will retail for $749 before subsidies, compared to $339 for the 1320. And AT&T, in what could be a real coup for Nokia/Microsoft, will offer the Lumia 1520 phablet to consumers ahead of the all-important holiday shopping season. As for Apple, it may or may not enter the phablet market at all, even though phablets are expected to generate $46 billion in sales this year, and that is anticipated to more than double in just a few years.

Apple's decision to stay high-end in all things mobile, as it demonstrated yet again with yesterday's new iPad Mini with Retina priced at $70 more than last year's model, leaves a gaping hole for its competitors. That's a hole that Nokia and Microsoft are primed to exploit with the new Lumia phablets.

Taking on Apple in the high-end, saturated smartphone market, especially as relative newcomers, is a tall order to say the least. Phablets? Samsung and others are players, but there's a niche there that's just waiting to get exploited.

Nokia also introduced a few new Asha smartphones that are equipped with even better cameras -- already a Nokia strength -- and offer users "affordable smartphone innovation." For countries that don't subsidize their smartphones in exchange for a long-term data contract, a low-end, high-quality device makes perfect sense. Nokia sold 53.7 million mobile devices last quarter -- most of which were low-end phones -- demonstrating there's some real opportunity in that piece of the market.

Now, the not so good news
Like the gambler on a hot streak who plays just one more hand, Nokia should have stopped after announcing the new Asha lineup and the even more exciting phablets. But no, Nokia also unveiled its new tablet, the Lumia 2520, featuring the same Windows OS as Microsoft's epic failure, the Surface RT. You remember the RT -- it's the reason Microsoft wrote off a whopping $900 million last quarter.

At least Apple with its new iPad is clearly targeting a specific market -- customers who are willing to pay for quality, along with a well-known brand. Nokia and Microsoft? The Lumia 2520 is priced at $499, which is $100 more than the new iPad Mini, and the same as Apple's really high-end, and ultra-thin, iPad Air. Time will tell of course, but it appears the 2520 is little more than an RT in a different package, and that doesn't bode well for either Nokia or Microsoft.

Foolish final thoughts
Nokia and Microsoft have a real opportunity. Phablets are one of the few unsaturated mobile computing markets around, and if the estimates turn out to be anywhere close to expectations, there's a large piece of a soon-to-be $100 billion pie that Nokia and Microsoft are primed for with the Lumia 1520 and 1320 devices. As for the new Nokia Lumia 2520 tablet? That's another inventory-related writedown just waiting to happen.

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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 October 24, 2013, at 12:23 AM, nudnyk wrote:

    It could be that Softia is banking on (even if relatively small) brand loyalty to the Lumia line. I think they hope to shore up sales in the tablet place, Not unlike in smartphones and inch their way up the market share, 1....2...3% which may be a 'foothold'. Time will tell, if Softia will end up with a profitable chunk of the smart mobile market before (as fool predicts) this entire industry becomes irrelevant to the cloud.

  • Report this Comment On October 24, 2013, at 9:30 AM, will1946 wrote:

    One can see from the articles here lately that the Fool is biased for Apple. Good luck. I would sell if I were you.

  • Report this Comment On October 24, 2013, at 11:42 PM, DWW wrote:

    First point, 2520 and iPad air may be the same price, but by no means the same specs.

    $499 iPad = No LTE, 16GB vs 32GB

    equivalent iPad is $729.

    Second point, The only reason Apple is still doing well is simply the same kind of blind devotion that RIM had a few years back, and look where RIM is now, Apple's turn is coming.

    It many cases the success or failure of a product is governed by factors that defy common sense, most people have no clue what they are buying or what they need and are simply following the lead of others around them. Every single person I know that has given Windows RT a fair try has loved it and they recognize it's current limitations like the app store, but appreciate the things it offers over the iPAD.

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