Clock ticking for Nokia

OvumWith Nokia having pinned its entire smartphone strategy on Microsoft’s mobile platform, the launch of Windows Phone 8 on October 29 will be crucial for the company.
 
Coming just days after the anniversary of the launch of Nokia’s first Windows Phone devices, the company is no doubt hoping that the update will provide a kickstart for the relaunch of its smartphone business.
 
With the Nokia Lumia 920 and 820 handsets due to go on sale in early November, Nokia is expected to benefit from Microsoft’s huge advertising push (reportedly in the region of $1 billion [€772 million]) for the accompanying Windows 8.
 
Nokia relies on Windows Phone
Nokia is unique in that it is the only vendor that has adopted Windows Phone as its sole smartphone platform. In 11 months, Nokia has managed to sell a reasonable number of its Windows Phone Lumia devices, though the 9.9 million is certainly not a roaring success especially when compared with over 100 million iPhones and over 100 million Samsung smartphones sold over the same period.
 
While it can been argued that Nokia was playing catch-up with its first round of devices (it was late to the Windows Phone game and only released its first device in November 2011), the same cannot be said of Windows Phone 8 as Nokia has had a chance to fully prepare for this launch. If the new Windows user-interface design does not resonate well with customers, not only will this be disastrous for Microsoft, but it could also spell the beginning of the end for Nokia.
 
Time is running out for Nokia and speed is key. While Microsoft has the reserves to allow Windows 8 and Windows Phone 8 to be relatively slow burners, the same cannot be said for Nokia. Failure in the smartphone market would leave Nokia with only its feature phone business to fall back on.
 
Given that the market is shifting inexorably to smartphones this is a shrinking opportunity. Repositioning its touchscreen Asha handsets (which are based on Nokia’s S40 feature phone platform) as smartphones (as the Nokia Mobile Phones business is currently attempting to do) will not change this situation.
 
Despite the close relationship between the two companies, the failure of Nokia would not necessarily mean the failure of Microsoft’s Windows Phone. HTC has shown a renewed interest in the platform – producing the signature devices for Windows Phone 8 – and several other original equipment manufacturers (OEMs) are continuing to support the platform, which provides them with an alternative to the increasingly competitive Android market.
 
 
Windows Phone’s image problem
Windows Phone’s biggest issue to date has been in customer acceptance of its significantly different user interface. While it is an excellent operating system (and perhaps better in some respects than its main rivals), it is different from the current status quo of a grid of apps user interface, a change that represents a perceived risk to potential customers, meaning that its benefit is therefore also its biggest challenge.
 
However, with the accompanying launch of Windows 8 and its Metro Start menu, Xbox design, and the update of its online services, Microsoft will be able to build consumer familiarity with the user experience, which should help to overcome this issue. To support this new user interface and drive consumer awareness of the new products, Microsoft is reportedly spending over $1 billion on marketing Windows 8 and Windows Phone 8.
 
Compared to the launch of Windows Phone 7.5, Ovum has noted an increase in optimism and support for the platform from vendors and operators ahead of Windows Phone 8, which is generally driven by the belief that Microsoft’s proposition is now both unified and complete.
 
Enterprise opportunity
With a fair degree of uncertainty around RIM, both in terms of its upcoming BB10 products and the company itself, there could be a significant opportunity for Windows Phone in the enterprise [market]. Neither Android nor iOS have fully managed to address the concerns of enterprises in the way BlackBerry has, as neither offers an end-to-end enterprise solution or decent sub-$200 devices – two big sticking points for enterprises which have thus far worked to RIM’s advantage.
 
However, Windows Phone 8 includes a number of enterprise-focused features which will allow it to address both of these issues. Windows Phone 8 now offers enterprises an end-to-end mobility solution, with support for C and C++ application development, BitLocker encryption, enterprise app deployment, and integration with Microsoft’s Windows System Centre and InTune device management tools.
 
Additionally, unlike iOS and Android, which have not been able to provide an alternative for low-end devices like the BlackBerry Curve, Windows Phone 8 should be able to deliver good quality devices in this price range due to its tighter OEM requirements. However, while Ovum expects Nokia to serve this opportunity in the near future, for now the low end of its Lumia range remains tied to Windows Phone 7.5, even in the latest Lumia 510.
 
Nick Dillon is a senior analyst for devices and platforms at Ovum. For more information, visit www.ovum.com/

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