Will a cheaper Lumia phone save Nokia?

The telecom falters in the competitive smartphone market, and some analysts are predicting a bleak future.

By TheWeek.com Apr 23, 2012 12:32PM
Finnish telecommunications giant Nokia (NOK) posted a $1.2 billion loss for the most recent quarter, citing a "mixed" response to its Lumia fleet of smartphones, which use the Windows Phone operating system developed by Microsoft (MSFT). Nokia says it will lower the prices of some of its Lumia phones in order to better compete, but CEO Stephen Elop insists that "Lumia is up and running in the USA." Industry watchers, however, are more skeptical about Lumia's prospects, and its ability to take on the iPhone and Android-powered phones.

Can Nokia save itself? Here's what some experts are saying:

Nokia is in way too much trouble: Nokia's sales are bad, but it's cash situation is even worse, says Henry Blodget at Business Insider. "The company is burning cash at a mind-boggling rate, and it's about to run into a cash crunch." At the current rate of nearly $1 billion per quarter, Nokia will be bankrupt in less than two years. It's gotten so bad that Nokia chief Elop is talking "about the need to conserve" cash. The company has to be "super-aggressive to have any chance of saving itself." Nokia is in a bind, and it "may well drown."

Actually, Nokia is in a good position to recover: "As bad as Nokia's financials look right now," you can't deem Windows Phone "a failure just yet," says John Biggs at TechCrunch. Nokia is "essentially waiting" for the Lumia to catch on, and its cheap pricing strategy will allow it "to gain market share." In fact, "Windows Phone is better than Android," and those who write Nokia off do so at their peril.

And Nokia can still grab new smartphone buyers: "Android and Apple (AAPL) have a lock on the smartphone market at present," says Charles Arthur at Britain's The Guardian. But about half of cell phone users still haven't switched to smartphones, meaning Nokia has a chance to lure new customers "with the right incentives." The next half of smartphones users "won't necessarily make the same choices" or "spend as much money on a phone," which could play into Nokia's hands. 


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5Comments
Apr 23, 2012 1:18PM
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I bought a Nokia 900 and have been playing with it extensively for the last 2 weeks. I was not initially swayed, but I will say after using the phone for sometime I believe it is much better than most people realize. The integration within windows phones is top notch. Live tiles work much better than Android's widgets at doing the same thing without draining your battery or cpu resources. The actual usability of the device is also top notch. They must have been reading Jakob Neilson's eye tracking and usability books. Text is clearly outlined and it makes it easier to read everything on the page at a glance. My brain and eyes appreciate it more than I first expected. 

The phone is also really responsive and fast. When I compared it against the Samsung Galaxy SII Skyrocket, I did not expect the responsiveness of the Lumia 900 to outperform it, but it did. Check out some of the youtube videos out there that compare the performance of the Lumia 900 to other phones. It will surprise you. Although it may not always be the fastest, its among the fastest, and provides a top notch user experience in streaming video and zooming when other phones with more horsepower might actually appear choppy by comparison. Top that off with the fact that my call quality and reception are top notch. I'm getting better 4G reception than my other friends at work who sit near me (and also have AT&T). I also really appreciate the Gorilla glass and polycarbonite body. Its a sturdy phone and it feels really good to touch.

Anyway, I don't mean to sound like a salesman. I just think that Nokia is on to something. If they can create such a quality product at such a good price, they will win market share with time. I also think that Windows Phones will gain in popularity. When I first saw the tiles approach I hated it, but I was really proved wrong. It's solid and the user experience surpasses that of my old Andriod phone.
Apr 23, 2012 1:01PM
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Thank you for providing a balanced article. This is journalism.

 

The majority of we read today is better labeled as gossip rather than publishable material.

Apr 23, 2012 1:26PM
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Thanks for showing the pros and cons.

I am a huge fan of the changes they have made and believe they did them just in time to save themselves. I see far more upside based on some very simply facts about Nokia:
- Robust patent portfolio
- Top tiered (now streamlined) talent= Quality products and launch
- Mind share
- Relationship with Microsoft
- Stable on the back end with Siemens for networking

Its very easy to get wrapped up in daily blogs with minute to minute action, but the facts here are that it Android took well over a year establishing itself as even existing amongst the general population.

What Microsoft has is what Nokia didnt. Control of data for searching, storing and providing  streamlined access to things people need when they access the web. Let alone native Office and Outlook integration for business users. The streamlined interface with MetroUI across all Windows based platforms (XBOX, Windows 8 etc) pretty much means they have covered various age groups.
Users like usability and an easy experience to get from point A to point B. I see this was their long term strategy a few years ago because they know they can really dominate in that arena.
It will be far easier for a younger XBOX user to use Windows Phone simply because of the legacy like nature in how they user interacts with it a la "Oh I dont need a manual because this works like XBOX Dashboard" or converting to Windows 8.

MSFT and NOK are looking forward. Sure they are bleeding money right now, but think they can turn the ship around in time. The Amazon reviews and blogs are very positive thus far on the Lumia line.

Apr 23, 2012 1:15PM
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Good viewpoints. Nokia's not burning $1 a quarter, they burned $1 billion in 2011. Nokia's booking lots of non recurring restructuring charges but that's to be expected when transitioning a large enterprise form one technology platfrom to another. Microsoft's contributing $1 billion a year to the restructuring and I'm sure there's more where that's coming from. Windows 8 and WP8 will be the real tests of Nokia's 2011 decision to switch to Microsoft's software. We'll be seeing Nokia Lumia 920 phones with multiple cores, 1GB mem, 16-64Gb storage and Pureview cameras at very competitve prices. Next. well seek Nokia Fluid phones and tablets with 3D screens for multimedia viewing.
Apr 24, 2012 6:53PM
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It's really too early to tell.  Let's not forget Apple was in a similar situation in 97 and also trading below $5/share, when they went to Microsoft for a $150M loan.

 

Nokia can, and should, get cash from Microsoft - so at least they can watch their Windows Phone products mature and keep the ship moving.

 

Use a Nokia Windows Phone for a few weeks, then you'll see the potential.

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