This week Microsoft bought the mobile phone branch from Nokia. Nokia is the only mobile phone maker fully committed to Windows Phone and sells three-quarter of the Windows phones worldwide. There is a lot of speculation about why Microsoft bought Nokia but my take on it is: Nokia wanted to start building Android phones and/or Nokia is in financial problems. Microsoft additionally buying 2B in Nokia bonds is a clear signal of financial problems at Nokia. Nokia needs that money really hard for paying Siemens in the NSN buy-out. But whatever the reasons are Microsoft needed to secure the future of Windows Phone. The ‘success’ of Windows Phone is really down to the effort of Nokia. If I look at the statistics of my Photocasa Gallery app in the marketplace this becomes quite clear. Every uptick in downloads is initiated by the launch and promotions of a new Nokia phones.
The big question now is: will Microsoft be able to continue and enhance the Nokia successes? Of course the Windows Phone development team and Lumia developers are now within one company but are they able to create better products. However it will be very difficult for Microsoft to make it a success. A lot of talent from Nokia is already leaving the company. The lead designer left and a group of Nokia employees already established a new smartphone company named Newkia. An even bigger problem will be that those who stay will lose that all important focus on the market because of internal restructuring. But the biggest challenge is losing the Nokia brand name. Nokia is world famous and has a good reputation. Customers won’t buy Lumia phones because they had good experiences with them in the past. The Lumia name is simply too small and too new.
It’s also interesting to see how Samsung, Huawei and HTC are going to react. Will the stop support Windows Phone platform? It’s hard to compete against Lumia phones when they are from Microsoft itself. Don’t forget Windows Phone is not free. My guess is that Samsung at least will keep a Windows Phone in their product lineup to see early on what the completion does. And the final challenge is keeping the carriers aboard. They now longer deal with Nokia for smartphones but with Microsoft, the owner of their biggest rival: Skype.
So where should Microsoft focus on? Looking at the market and statistics they should focus on first time users in emerging economies with low end smartphones. That’s the only place to really gain market share. If you look at my chart you see the biggest jumps when the cheap 520 and 620 (I use the 620 for development and somehow like that phone pretty much. Not enough to trade in for my iphone for daily use but it’s a nice phone) phones were introduced. The same we can see from AdDuplex statistics. Gaining market share is very important to attract developers for the platform to solve the lack of apps issue with Windows Phone.
As you can see there is a difficult road ahead for Microsoft and their Lumia smartphones. My personal opinion is that they will not be able to become as big as Android or Apple and their global market share will never be over 10%. And for Nokia? Well they will be a healthy network company, which has 30 months for developing a new Nokia smartphone. (Nokia is contractually not allowed to enter the smartphone market for 30 months) Their brand will still be strong over 30 months and their relationship with telecom providers is still in place because of the networks business. Could we see a new Nokia smartphone in 30 months running Tizen or Android?