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Microsoft's New Lumia 530 Doubles Down on the Low-End Market

The new Lumia 530. Source: Nokia.

Microsoft (NASDAQ: MSFT  ) desperately needs a few smartphone wins. Worldwide market share of the Windows Phone operating system is moving backwards, so the company is looking to new phones to reverse the trend.

In the low-end market, that means the new Lumia 530 is the company's new inexpensive savior. 

Hoping for a repeat
The new device has low-end specs like its predecessor, the Lumia 520. The 330 sports a 4-inch 854 x 480 LCD display, 5-megapixel camera, 512MB RAM, and 4GB internal storage. The processor receives an upgrade from a 1GHz Qualcomm dual-core Snapdragon to a 1.2 GHz quad-core Snapdragon 200. Users can also tap into 15GB of Microsoft's OneDrive cloud storage for free, and expand memory up to 128GB via a microSD slot.

Source: Nokia.

But one of the most important features of the phone is its price. The Lumia 520 sold for about $158, while the new 530 costs just $99. That makes it the cheapest Windows Phone to ever hit the market.

So, why does that matter?

The precursor to the Lumia 530 was a huge success for Microsoft. The device helped boost market share in some parts of Europe to 10% and was the best-selling Windows Phone last year -- taking more than 30% of sales.

Around this time last year, the Lumia 520 made up about 40% of Windows Phone sales in India, and just over 20% in the U.K. So it's no surprise the new Lumia 530 launched in India earlier this month and will hit the U.K. market in a couple of weeks.

But while the 520 has been a strong Windows Phone device, its successor faces some significant hurdles.

Been there, done that
According to IDC, the Windows Phone worldwide market share in Q2 2014 was 2.5%, down from 3.4% year over year.

In addition to that, IDC says about 61.4% of Windows Phone devices sell for about $200 or less, off-contract. In contrast, about 58.7% of Android devices -- which are known for their cheap prices in emerging markets -- sell in that same price range.

Source: Statista.

Microsoft is at the point where it needs to do something to boost its market share and units sales. In fiscal 2014, Microsoft's Phone Hardware business -- including the newly acquired Nokia Devices and Services -- brought in $54 million in gross margin from $1.99 billion in revenue. 

The Lumia 530 could help turn around Microsoft's declining market share, or it could get lost in the glut of low-end devices it already sells. Back in April, the Lumia 520 got an upgrade to new Windows Phone 8.1 software, so the company may be launching the 530 in markets saturated with the good-enough 520.

It's hard to doubt Microsoft's strategy here, though. If a $158 Windows Phone device became the best-selling smartphone for the platform, why couldn't a slightly better version at cheaper price continue the trend? With the Lumia 530, Microsoft is doubling down on the low-end markets that love the 520 -- and that's about as sure of a bet as the company's going to get right now.

Over the next few quarters, it'll be important to watch how the market reacts to the new handset. Plenty of sales comparisons will be made between the 520 and the 530, but with Windows Phone continually losing more ground to Android, Microsoft needs its newest device to outpace its predecessor.

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Chris Neiger

Chris has covered Tech and Telecom companies for The Motley Fool since 2012. Follow him on Twitter for the latest tech stock coverage.

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