Nicoll: Thanks to Microsoft, Nokia will succeed in North America

Chris is the principal analyst for ACG Research's mobility service and is responsible for consulting engagements, client relations and providing thought leadership for the industry.

 Chris Nicoll

This may sound strange, but I have not owned a Nokia or Microsoft OS phone for about a decade. Remember Windows Mobile? Shortly after Y2K I thought it would be helpful to run the same OS on my phone as on my PC. As with my PC I quickly found out I was plagued with the same frequent reboots and crash problems on my phone. My Nokia experience, which was an old feature phone I used on my trips to Europe, was much more successful because of the interface, but it didn't translate to a U.S. version, at least for me. Given my preceding statement, why am I predicting that Nokia will succeed in North America, thanks to Microsoft?

At CES I saw a Nokia Lumia 800 demonstration of the Windows Phone 7 (WP7) OS and was blown away on several fronts: the user interface is new and different, the operation is simple and the 800 is an uncomplicated yet powerful platform. But before you go crazy on the definition of success let me define what that means in the short term: Nokia pulling 10 percent of the U.S. handset market share and Microsoft pulling in 20 percent of the OS market share by 2015.


The "A"s are still dominant

To date the US market has been dominated by Android and Apple devices. In any quarter, one or the other is in a leadership position depending on a particular hot phone release. RIM has a small but loyal following. The key development in the smartphone market is that the devices have become personal objects. Many iPhone users fiercely identify with the Apple brand; Android users have flocked to a wide variety of devices and formats, and RIM users are attached to their unique messaging features. 

Smartphones are going the same way as the automobile. There are over 350 different models of cars for sale in the U.S. In a similar vein, according to CTIA, vendors brought an additional 120 new smart phone models to the market in the last year. People want a choice, and the successes (and challenges) of the Android Ecosystem are giving Nokia and Microsoft a clear playbook from which to pull.

Nokia has gotten smarter and revamped its channel strategy, using the operators as a primary channel, which requires a device customization strategy. This is a change from the company's earlier attempts at the U.S. market with its one size fits all approach. Samsung realized the importance of creating segmentation with operator-specific models of its phones, and Nokia is signaling the same strategy. This was evident at CES 2012, where Nokia joined the AT&T Developers Summit, touting not only the virtues of Nokia and MS, but the speed and power of the AT&T network. These comments were repeated at the Nokia Analyst events, highlighting the strength of the AT&T network helping to power the Nokia/WP7 user experience.

Microsoft, after starting off with stringent rules governing WP7 customization, has figured out what rules to maintain and which to relax with WP8 in order to allow its device partners to have a customized WP experience without suffering the fractures straining Android. Does Microsoft have it all figured out? Doubtful and likely missteps will occur, but the initial release is already a step in the right direction.

Simplicity rules

My resident mobile device expert at home is my 14 year old son, he of the mobile gaming and 4,500 texts a month clan. His favorite phone was the AT&T Galaxy S II I have (models on both AT&T and T-Mobile) before we bought him an iPhone 4S (to combine the iTouch he lost and the Droid phone he broke). Then he started toying around with the Lumia 800. He marveled at the compact design, but what caught his attention is the user interface. His refrain was, "this is too simple; it's too easy to use." Some adults may need some training and that may require a quick video tutorial when first programming the phone, but clearly the younger users get it.

The WP7 interface reminds me of my iPad app, Flipboard, one of my favorite apps for tying many different information sources together simply and clearly. I no longer spend time looking at my Android phone for the various icons on top of the screen to see if I have any e-mails, texts, IMs, Tweets, LinkedIn messages or other notifications. I just glance at the screen and see what is going on. Instead of icons and opening apps, there are active tiles that show messages or status. During a demo of the Lumia 800 at the Consumer Electronics Show in January, Chris Weber, president of Nokia North America, pointed out that "voice is the new/old UI" as he used voice commands to control the Lumia 800.

Although some markets are fretting about Nokia's brand recognition in the U.S., message board comments from teens and young adults suggest that Nokia's brand is gaining traction. My kids and their friends know that Nokia makes good phones, but old timers like me remember solid phones with an easy-to-use UI. For a company that needs to position itself in a key market, this is a great place to start. And with strong partnerships with Microsoft and AT&T (and T-Mobile), Nokia is not exactly going at it alone.

Multiscreen could be the difference

Do Nokia and Microsoft have a slam dunk? Of course not, app support is lagging, and the company must have early success with the Lumia 800 and Lumia 900 to generate enthusiasm with three key constituents: consumers, operators and app developers. My early programming experience with my Lumia 800 was not exactly cumbersome, but I had to create yet another I.D. (on Microsoft Live), revalidate that I.D. on the Nokia system and activate Zune. The initial phone update required me to physically connect the phone to my laptop. Not ideal, but not unlike what you go though if you are a first time Google or Apple user and want to access the full service features.

The future of mobility and entertainment is multiscreen with users creating their own value-add with their smartphones, tablets and laptops. Entertainment is driving users' behavior into simultaneous content of which enterprises and operators are not taking advantage. This affiliated content, which is increasing usage of mobile devices, is getting the attention of the entertainment industry. And let's not forget that it represents another revenue opportunity.

The ecosystem that finds a way to include the largest and most powerful screen of all (TV) will be the winner. Apple, Google and Microsoft, the three major OS vendors, (assuming we can call MS a major OS vendor in the mobile space at this early date) have a play on TV and each of the mobile screens. If played correctly, this is where MS could help drive mobile success. Apple has something of a lead, but it is far too early to be picking winners just yet. 

Chris Nicoll has more than 20 years of expertise as a leader in defining telecom strategy. Chris is the principal analyst for ACG Research's mobility service and is responsible for consulting engagements, client relations and providing thought leadership for the industry. Prior to joining ACG Chris was principal analyst at Nicoll Consulting, where he developed marketing strategy and positioning for leading telecom operators. For more information about ACG's mobility service contact Chris at [email protected].