Nokia World device launch impresses some analysts but firm’s share price still tumbles
Nokia held its annual Nokia World event this month, unveiling two new Lumia handsets running off the updated Windows Phone 8 operating system – but opinion remains split over whether its partnership with Microsoft can turn its ailing fortunes around.
Nokia World, held this year in New York, marked the first anniversary of Nokia’s adoption of Microsoft’s OS for its smartphone handsets.
This year’s event saw the unveiling of two new handsets, the Lumia 820 and Lumia 920 (pictured below), joining Samsung, HTC and Huawei as the first manufacturers to include the Windows Phone 8 platform in their handsets.
The immediate reaction to the announcements didn’t appear to impress investors, as Nokia’s shares in Helsinki tumbled 13 per cent while the presentations were being made and closed at €1.99 per share. Meanwhile Nokia’s US-listed stock was down almost 10 per cent to $2.55 per share.
It was the latest in a long stretch of negative headlines for the firm over the past 18 months – which has seen more than 10,000 job cuts and financial losses totalling £2.4 billion.
Optimism
But a number of analysts Mobile News spoke to following the event suggested Nokia is now making progress.
Some described the firm’s range of Lumia devices as “eye-catching” and “desirable” and, importantly, capable of providing genuine competition for the market’s more dominant smartphone players.
IDC research manager for European mobile devices Francisco Jeronimo praised Nokia’s focus on providing “unique” features, such as Nokia Maps, Transport, Music and Mix Radio, which he says are helping to differentiate it in a very crowded market.
He said Nokia’s performance over the next two quarters will “define its future”.
Jeronimo said: “The Lumia 920 has the same body shape as the Lumia 900 so won’t be a breakthrough change in Nokia’s design. What’s inside is where the biggest opportunity lies for Nokia.
“It will make it a contender to its competitors such as Samsung, Apple and HTC, who will all be releasing devices in the coming weeks. From a hardware perspective, the new Lumia 920 can compete head to head with any of the current high-end smartphones on the market.”
Informa Telecoms & Media handsets and devices principal analyst David McQueen agreed, calling the 920 an “impressive piece of kit”.
He said: “The new flagship Lumia 920 looks similar to its predecessor but takes the (Lumia) 9 Series up a notch.
“Indeed, with this latest solid array of smartphone products and differentiated services, the company may have finally bottomed out in the smartphone market and its Windows Phone 8 devices look set to mark the true beginnings of its climb back into the affections of the smartphone user.”
Awareness issues
However, not everyone agrees. And there are still concerns about how successful Nokia can be using the Windows platform as Android and Apple iOS continue to dominate market share.
Figures from IDC showed in Q2 2012 that Android and iOS accounted for 88 per cent of global smartphone shipments, with Windows Phone only representing three per cent.
A lack of devices running the Microsoft-powered OS is also a concern, and despite a number of manufacturers now including Windows Phone 8 in their handset portfolio it is still overshadowed by Android. Research shows in the same three-month period, there were just 12 Windows Phone devices compared to 120 running Android globally.
The low adoption rate from manufacturers for the OS has resulted in problems with awareness, say analysts.
Ovum chief telecoms analyst Jan Dawson said: “Awareness around Windows Phone certainly hasn’t been helped by the fact that it is intentionally very different from those used by Google and Apple. It’s foreign to people, alien almost, and that puts people off.”
CCS Insight managing director Shaun Collins added: “The low consumer awareness around the OS can only be addressed by sustained marketing investment and significant commitment from network operators.”
Competition
Following Windows Phone 8’s unveiling in July, a number of handset manufacturers have been quick to confirm their involvement – although it remains to be seen how seriously they take it and whether it is included on their top-range devices instead of Android.
McQueen said the early indication is manufacturers are being attracted back to Windows Phone, and he is convinced it will prove enough to push Nokia back into consumer favour.
“Windows Phone 8 is attracting OEMs back to the platform and with the arrival of further devices before the end of the year to bolster the ecosystem, Nokia could find itself in prime position to capitalise on the upsurge in interest.”
However, Dawson doesn’t share this confidence: “Nokia still has a long way to go to get its smartphone division back into contention, back into growth and back into profitability. It won’t see serious growth or profitability until it gets past a certain adoption rate, and that’s some way off.
“The challenge is to do whatever it takes to get its own devices, and Windows Phone devices in general, over that adoption hurdle and into some real momentum.”
However, while growth in Windows Phone is expected (46 per cent share by 2016, according to IDC), this will not necessarily be to the benefit of Nokia as the likes of Samsung and HTC may benefit from any spurt in popularity.
IHS Global Insight telecom research analyst for Europe Peter Boyland said Nokia’s biggest competition will come from Samsung, which is now experiencing the same success and popularity that Nokia once commanded in the market.
Boyland’s comments dismiss those made by Nokia CEO Stephen Elop, who suggested Samsung’s Windows Phone 8 announcement earlier this month was merely to draw attention away from its patent case defeat to Apple, which cost the firm $1 billion.
Boyland said: “Nokia once led the handset market, but lost this crown to Samsung earlier this year. It has set out its main objective as being to differentiate Windows Phone 8 against Android, iOS and Research in Motion’s BlackBerry platform.
“However, Nokia now faces the prospect of greater competition from rival Samsung, which recently announced it would launch its own Windows Phone 8 handset within the next
few weeks.
“Microsoft has said other vendors, including HTC of Taiwan and Chinese giant Huawei, also have plans to release Windows Phone 8 devices.”
Serious investment
Collins believes the key for Windows Phone 8 to be a success will be through “eye-watering” amounts of marketing – to encourage customers to switch from Android or Apple.
They will also need to price handsets “aggressively low” in an attempt to get the OS on a larger number of devices to command the same wall space as its competitors, he says.
On top of that, Nokia will need to become favourable to its reseller partners, such as operators, dealers and retail staff, believes Jeronimo, who says the manufacturer faces a “huge challenge” to convince consumers to switch platforms.
He said: “Nokia needs to excel at the point of sale, so training programmes, retail demonstrations and advertisements will be key. It will win salespeople’s opinions towards Windows Phone compared with Android or iOS experiences.”
McQueen added: “The ability to translate the message at the point of sale and prove the value proposition to the consumer will determine the success of Windows Phone devices and help the platform grow. Nokia will do this through improving retail execution and simplifying marketing messages.”
