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Nokia Lumia: “Good, but not good enough”

Nokia’s future hangs in the balance as its new Windows-based smartphones hit the market. YLE News talked to leading industry bloggers who say Nokia needs to do better than Lumia to succeed in the highly competitive smartphone arena.

Nokian Windows-puhelimien mallit Lumia 800 (vas.) ja Lumia 710. Image: Nokia

In late November, the Finnish mobile giant started shipping the Lumia 800, a sophisticated smartphone practically identical in design to its earlier N9, to selected Western European markets including the UK and France. The cheaper Lumia 710 made its debut in Asia, and in mid-December Nokia announced that the model would also hit the shelves in the United States in January 2012.

The phones were launched less than ten months after the announcement of Nokia’s strategy shift away from its own Symbian and MeeGo platforms. In February, CEO Stephen Elop revealed that Nokia would adopt Windows Phone as its main smartphone operating system. As the company’s shares nosedived, Nokia worked fast to present the world with the first fruit of the deal with Microsoft: the Lumia brand.

“Technology-wise, I think they’ve done all the right things,” says Horace Dediu, founder of the mobile industry blog Asymco. “The problem with the market today is—it’s so dynamic, it’s so competitive, there are so many players with so many products that it’s very difficult to stand up and gain a massive share. My initial impression is that it’s a good product, but, right now, being good isn’t enough.”

Stefan Constantinescu, Senior Editor at industry blog IntoMobile, expresses a similar sentiment: Lumia is good, but that’s not going to cut it.

“They needed to come out with something that wows people,” he says. “Other Windows Phones on the market have larger or more advanced screens, they have front-facing cameras, which is something that Lumia 800 and 710 do not have.”

The bloggers say that Lumia phones have been getting good reviews from mobile phone analysts—even though, Constantinescu points out, those who give Lumia phones good marks are not necessarily in a hurry to buy one. It remains to be seen whether the series will attract enough consumers to make it a commercial success.

Cautious forecasts

So far, Nokia and Microsoft have been tight-lipped on sales figures for the Lumia brand. On December 16, a survey by Exane BNP Paribas showed that only 2.2 percent of polled European buyers firmly intended to make Lumia their next phone. The brokerage lowered its sales forecast for Lumia from two million units to 800,000.

While acknowledging that nothing can be known for certain until official results are released, the bloggers gave cautious estimates.

“The [Lumia] 800, I think it will do poorly. If they sell more than two million of them in the fourth quarter of this year, I’ll be surprised,” says Constantinescu.

Dediu is slightly more optimistic about the first launch quarter:

“I think one to five million is not unreasonable,” he says, noting that Nokia needs to not only sell to end users, but also fill store shelves around the world. “Of course, if it happens to be below a million, that would be pretty bad.”

For reference, Apple sold about 17 million iPhones in Q3—a difficult quarter for them, Dediu says, as they were transitioning from the iPhone 4 to the 4S. Apple usually sells about 30 million phones per quarter.

But, Dediu notes, Nokia will likely call it a success if they sell a few million Windows Phone products. They have not been doing well in smartphones lately and this is their first joint effort with Microsoft.

Reaching across the pond

The day Nokia announced the deal with Microsoft is known among Nokia fans as a dark day in history, says Constantinescu. However there is a chance that Microsoft might help Nokia to succeed where it has traditionally failed: on the US market.

“In the States, Nokia has to sell phones to operators who require all these small things, like—please use our custom icons, please change the case a tiny bit, we want a particular colour, and so on,” Constantinescu explains. “And Nokia wasn’t really built to respond to such operator requests.”

However on December 14 came the announcement of impending Lumia 710 launch in the US. Nokia is evidently trying again—and structural issues might not be as much of a barrier this time.

“I think that having Windows Phone at least allows them to go down that road, which was not open to them with Symbian at all,” Dediu notes.

Not to be ignored are also issues of advertising, which is a burden that Microsoft is ready to bear, the bloggers say.

“What Microsoft has offered Nokia is marketing money, meaning that, when the product ships in the US, they’ll run ad campaigns jointly with Nokia,” says Dediu.

Constantinescu agrees on this point: “I’m completely prepared to see them spend hundreds of millions of dollars advertising the living hell out of Windows Phone. You will want a Windows Phone even if you don’t,” he says wryly.

“No plan B”

These are all, of course, concerns of the relatively near future. However, a larger question looms: what does Lumia, as its first Windows-based phone, mean for Nokia?

“They bet their future on Microsoft. They don’t have a plan B,” says Constantinescu. “If the Lumia line-up fails, then it is extremely questionable as to how Nokia will go forth in the future. “

He notes that it is difficult to talk about Nokia’s fate without bringing Microsoft into the discussion.

“It’s not a question of whether Nokia will come out with something fantastic. It’s a question of whether Microsoft can come out with something to give Nokia a chance to survive,” he explains.

Dediu points out that what is occurring right now is actually a curious phenomenon. Microsoft and Nokia have both historically built their market strength on being good enough, but not the best. And now, these giants are coming into the smartphone market as the underdog, trying to convince others that, this time, they are the best.

This may be a challenge—investor faith in Nokia has not been so low since the mid-90s and Nokia needs to turn around its image as “the big, but rather bland brand,” in Dediu’s words.

“If they don’t pull something magical out of their hats by the end of 2012, then it is going to be extremely hard to tell if there's still going to be Nokia as we recognise them today by the end of 2013,” Constantinescu predicts.

The results of Lumia’s first launch quarter should point as to which way the wind will blow for Finland’s biggest company.

Stefan Constantinescu is a Helsinki-based blogger writing for the cell phone news blog IntoMobile since 2007. In 2008, he left for a stint at Nokia, but eventually returned to the blog in 2009.

Horace Dediu is also based in Helsinki. He worked for Nokia business development for eight years, leaving in 2009. Today he blogs and offers commentary on the mobile phone industry. Dediu is the founder of the widely respected Asymco blog.

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