Microsoft (NASDAQ:MSFT) just revealed three new Nokia Lumias -- the 730, 735, and 830 -- at IFA 2014 in Berlin.
The 4.7-inch Lumia 730 will be the successor to the middle-range Lumia 720. The 730 is powered by a 1.2GHz quad-core Qualcomm Snapdragon 400 chip, have 1GB of memory, 8GB of internal storage, microSD support, a 6.7-megapixel rear camera and a 5-megapixel front-facing one. That beefy front-facing camera comes with a dedicated app for quick selfies. The Lumia 735 is the 4G LTE variant of the 730.
The Lumia 830, touted as an "affordable flagship", is the successor to the Lumia 820. The device is powered by a 1.2 GHz Snapdragon 400 chipset, has 1GB of RAM, 16GB of storage, and a 5-inch AMOLED screen.
The two devices will cost roughly the same as their predecessors -- the 730 will cost €199 ($261), the 735 will cost €219 ($288), and the 830 will cost €330 ($434). All three devices will hit the market later this month.
Will these new mid-range Lumias help Microsoft save its struggling Windows Phone OS, which only claimed 2.5% of the smartphone market in the second quarter?
Does anyone want a mid-range Lumia?
Nokia's handset division, which Microsoft acquired for $7.2 billion, is the only notable player in Windows Phones. According to research firm AdDuplex, 95% of all Windows Phones devices in the world are Nokia devices. Of these handsets, 30% are Lumia 520s, the bottom-end device that will soon be succeeded by the $100 Lumia 530.
The flagship 925, a variant of the 920, which launched for around $550 last year, only accounts for 3.4% of the market. The mid-range 720 only grabbed 4.6% of the market. AdDuplex did not identify the 820's market share, but the Lumia 800, its predecessor, held only a 3.7% share.
Looking at those numbers, we understand why former CEO Stephen Elop, now head of Microsoft's Devices Group, believes that launching low-end Windows Phones into emerging markets is the only way for Windows Phone to gain market share. Unfortunately, that strategy is now being undermined by Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) sub-$100 Android phones, and even cheaper Firefox phones.
The market for mid- and high-end Lumias remains weak due to competition from Apple (NASDAQ:AAPL) at the top, and from Android manufacturers all the way down. Therefore, new mid-range Lumias might appeal to a niche group of customers, but it's unlikely to help Windows Phone gain any real momentum.
Nokia's biggest problem
Nokia's Lumia hardware isn't inferior, but the division simply can't support an entire OS by itself without more hardware partners. HTC only launched a few Windows Phones to escape Samsung's (NASDAQOTH:SSNLF) dominance of the Android market. Samsung experimented with a few Windows Phones, presumably to become less dependent on Google. But none of these devices control a visible share of the Windows Phone market.
Huawei, the third largest smartphone manufacturer in the world, recently gave up on Windows Phones altogether. Speaking to The Wall Street Journal last month, CEO Richard Yu said that his company was "losing money for two years" on Windows Phones.
The only two companies that have enough market share to control a market on their own are Apple and Samsung. Of these two, only Apple has controlled the market with its own operating system. Samsung's effort, Tizen, was recently delayed indefinitely.
Apple only launches high-end phones at premium prices. Samsung avoids going head-to-head with Apple in the top-end by sticking with mid-range devices. Meanwhile, disruptive new players like Xiaomi are filling out the low- to mid-range price tier with higher-end devices sold at razor-thin margins.
In this saturated market, there's simply no room for Nokia's Lumia devices. Windows Phones' dwindling market share keeps hardware makers and customers away, leading to a negative feedback loop where Microsoft has no choice but to have Nokia do all the heavy lifting on its own.
A Foolish final word
It's hard to see a happy ending for the Lumia and Windows Phone. The new mid-range Lumias simply don't have the installed base to save Windows Phone. The only hope for the Lumia line and Windows Phone is to aim low and hope Lumia 520 users upgrade to the Lumia 530; but I have serious doubts that it can survive the coming onslaught of Android One devices.
In my opinion, Microsoft should be concentrating on launching a wider variety of low-end Lumias, while scaling back on its mid- to high-end offerings. That way, it can flood the low-end in emerging markets like India and China before Android manufacturers establish a firmer foothold.
Leo Sun owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.