Nokia exec: Android-based X phones fill a gap in our portfolio

BARCELONA, Spain—Nokia's (NYSE:NOK) embrace of Google's (NASDAQ:GOOG) Android platform for its X family of phones was necessary to fill a gap in Nokia's device portfolio, a top Nokia executive said.    

Microsoft (NASDAQ:MSFT) is in the process of buying Nokia's handset business and Nokia uses Microsoft's Windows Phone as its main smartphone platform. Yet using Android Open Source Project software for three devices was warranted because Nokia needs to address the affordable smartphone market more aggressively, according to Timo Toikkanen, executive vice president of Nokia's Mobile Phones division.

In an interview with several reporters here at the Mobile World Congress trade show, Toikkanen said that while Nokia's Lumia Windows Phones are still its main smartphone offerings, Nokia wanted to give consumers in emerging markets more choices. "You really need a broad portfolio and very, very good price point coverage in these markets," he said.

Nokia's newest Asha touchscreen phone, the 230, will sell for around $62. The Lumia 521, a variant of the best-selling Lumia 520 that T-Mobile US (NYSE:TMUS) sells, is one of Nokia's cheapest Lumia phones and goes for $126 at full retail price. However, most higher-end Lumias can range from $300 to $500 or more for the full retail price.

In contrast, 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.

Source: Nokia

Toikkanen said the X phones will likely not come to North America, Japan or South Korea since Nokia does not sell its Asha phones or similar devices in those markets.

Toikkanen also said he did not think there was a danger of X phone sales outpacing Lumias, and that the new family is aimed at taking share away from similarly priced Android phones. "We are taking way from the competition," he said. "We're not taking away from Lumia."

However, the new phones also come as Microsoft has announced plans to bring Windows Phones in general down to lower price points this year. That could make for a confusing marketing message and lead to overlap between low-end Lumias and the X phones, which Toikkanen acknowledged.  

"We'd be very happy managing that complexity insofar as consumers feel they are getting more choice, and insofar that we feel developers are getting access to monetization," he said. Part of the reason Nokia is embracing Android is to get access to the app ecosystem, which is much larger right now than on Windows Phones. Toikkanen said developers in emerging markets find it hard to monetize apps, because most consumers don't want to pay for apps only to realize they don't like them. So Nokia is embracing a "try and buy" method for apps with the X phones and also is pushing operator billing.

"It's too early to call the launch of Nokia X a game changer," Ovum analyst Tony Cripps wrote. "However, it definitely shakes up an industry that has become fixated on incremental advances and smart accessories as growth drivers of hardware sales, largely at the expense of further ecosystem development. Nokia's strength in developing markets will be a major catalyst for sales of Nokia X, which brings a level of design and build quality to the low-price smartphone segment that is largely lacking today. Other OEMs will be forced to up their game in this key market segment."

X phones will be priced below Lumia phones, and even as Lumia devices get sold at lower price points than they are now, Nokia will push the X family to prices below that.

"Just think of this as a continuous trend rather than a shift," Toikkanen said. "If we want to be connecting the next billion people in the emerging markets, in the growth markets, we need to be part of that trend."

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