In affordable smartphones, Firefox OS shines but Nokia's X phone strategy is murky

Phil Goldstein

BARCELONA, Spain—One of the major themes I'm hearing here at the Mobile World Congress trade show is that handset makers across the board are focusing on affordable smartphones. Mozilla and its Firefox OS partners seems to be hitting the mark more than others by aligning the user experience they're delivering with the price points they are setting for the phones.

I'm less convinced of Nokia's (NYSE:NOK) strategy of using Google's (NASDAQ:GOOG) Android platform for its X family of phones, which seems like an awkward fit for a company that has so heavily embraced Microsoft's (NASDAQ:MSFT) Windows Phone.

Affordable smartphone announcements are rivaling premium, high-end ones here. I have no doubt that Samsung Electronics' Galaxy S5 or Huawei's Ascend G6 will be bigger hits than any of the Firefox OS phone announced at the show, but there seems to be a concerted effort to go after the cost-conscious smartphone consumer.

The focus on affordable smartphones makes sense. Most analyst research firms and major wireless companies predict that another 1 billion people will get online over the next several years, primarily through their mobile devices. This Internet adoption will primarily be in growth markets (as an aside, I've noticed here that the term "growth markets" has been replacing "emerging markets" in the industry nomenclature. I can understand the perspective of companies and consumers in those markets being a bit peeved at the connotation that comes with "emerging" or "developing" markets.)

Mozilla's Firefox OS is targeted squarely at consumers in those markets. Mozilla partners unveiled new devices this week, including the ZTE Open C and Open II, Alcatel One Touch's Fire C, Fire E, Fire S phones and Fire 7 tablet. The companies did not disclose pricing for the new phones, but current generation of Firefox phones range from $90 for an unlocked ZTE Open to $180 for the Alcatel One Touch Fire.

However, this year Mozilla not only improved the software of its phones, making them speedier and more responsive, but it also committed to hitting a price point of $25 for a Firefox OS smartphone, using  WCDMA and EDGE turnkey reference chipset designs from chipmaker Spreadtrum. Mozilla and its partners are pushing Firefox OS to new markets, including Costa Rica, El Salvador, Guatemala, Nicaragua, Panama, Argentina and Ecuador, with a focus on Africa and Asia later this year.

I played with a few of the new Firefox OS devices and found them to be pretty zippy given their low-end specs. The apps were responsive and the universal search feature for apps and web content provided results quickly. In general, I think if Firefox OS can be pushed to lower and lower price points it could prove popular in these growth markets, especially for people who are trading up from a feature phone to their first smartphone.     

But Nokia's X phone strategy needs some work. Nokia executives say the phones will fill a hole in the company's product portfolio, and that Nokia wants to aggressively attack the affordable smartphone market. It could be a tacit acknowledgement that its Lumia Windows Phones are just not priced low enough or the Windows Phone ecosystem is not strong enough in these growth markets. Microsoft wants to lower price points for Windows Phones by working with new OEMs that are strong in markets like China and India and getting low-cost components that will help drive volumes.

Nokia said that as Lumia price points come down, X phone price points will fall as well, and will largely be lower than Lumia prices. However, for now the X phones still seem pretty pricey for the affordable smartphone segment. The Nokia X will sell for around $122 and will be available immediately in Asia Pacific, Europe, India, Latin America, the Middle East and Africa. The X+ will be available in the early part of the second quarter for around $136 and the XL will be available around the same time for around $150.

I had a decent experience with the X phones. The homescreen is fairly responsive, but some applications (especially games) were a bit laggy and slow. The X phones are well designed and include some key Nokia features like Here Maps and Mix Radio, as well as Microsoft offerings like Skype. I just think that the user experience does not match the relatively high price point. Nokia should have priced the phones $30 to $40 below the current price points if it wanted to aggressively compete with lower-end Android phones in growth markets. It's also not clear if or for how long Microsoft will tolerate the Android-based X phones once it takes control of Nokia's handset business in the next few weeks.

I likely have a skewed perspective on what constitutes "affordable" and "high performance." I'm an American journalist who covers the wireless industry, and I have high expectations for smartphone performance. A consumer in India, Costa Rica or El Salvador who can only afford to spend, at most, $100 or so on a smartphone likely doesn't care that the phone lacks a quad-core processor or high-definition screen. In many cases, those consumers will be moving up from feature phones and will be getting online for the first time.      

Getting affordable smartphones into their hands and exposing them to the Internet is a laudable goal, analogous to the work Facebook (NASDAQ:FB) and its partners are pursuing via Internet.org. However, for smartphone makers themselves, another key goal should be to deliver a quality user experience that gets consumers to buy into ecosystems and hopefully, over time, be able to get better and better smartphone experiences as prices for components come down.  

Affordable smartphones are clearly going to be a major part of the market for years to come. Yet companies competing in that segment need to make sure they deliver high-quality user experiences and don't overcharge and fail to deliver on that performance. That's a recipe for disappointment no matter what market you live in.--Phil

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