March 28, 2024

With New Smartphones, High Hopes for Nokia and Microsoft

Nokia’s chief executive, Stephen Elop, presented the Lumia 800, a €420 ($584) flat-screen device aimed at high-end users, and the Lumia 710, priced at €270, which is aimed at cost-conscious consumers. Both devices are being sold this month in six European countries and later this year in parts of Asia.

The smartphones are the result of an eight-month collaboration between Nokia and Microsoft that saw executives meet periodically in Iceland to oversee the project.

Analysts said the alliance could help Nokia stem its declining share of the smartphone market, where it trails Google’s Android phones and Apple’s iPhone.

“Nokia really needed this to happen today, and this is a new start for the company,” said Pete Cunningham, an analyst in London with the research firm Canalys. “This helps stop the bleeding and will help Nokia get back in the game.”

The new lineup aims to revive Nokia’s tarnished reputation as an innovative force in mobile phones, an industry it pioneered and dominated until Apple and Google leveraged more user-friendly software to wrest control of the smartphone business four years ago.

Mr. Elop, a former Microsoft executive who made the decision to enter the software alliance with his former employer last February, said the new Lumia cellphones showed that Nokia was delivering on its promised turnaround.

“This signals our intent to be today’s leader in smartphone design and craftsmanship,” Mr. Elop said.

The Lumia 800, whose design is based on Nokia’s N9 smartphone, a product of its now-defunct alliance with the chipmaker Intel, seeks to exploit the capabilities of Microsoft’s Windows Phone operating system, which has struggled commercially and has only 2 percent global market share, according to International Data Corp., a research firm.

Mr. Elop said Nokia planned to introduce several cellphones in the United States, the world’s largest smartphone market, by early 2012. He did not give details on which handsets Nokia planned to sell in the United States, where it has only a 1.2 percent share of the smartphone market. He said the phones would be made to work on both the 3G and CDMA standard networks used by ATT, Verizon Wireless, T-Mobile USA and Sprint.

The Nokia-Microsoft alliance is a last-chance effort of sorts for both companies to find traction and market share in the critical, fast-growing smartphone business, devices that are rapidly becoming the favored cellphone sold in many markets.

Nokia and Microsoft are being forced play catchup, as Apple, Google and Samsung, the U.S. market leader and largest seller of phones that run Google’s Android operating system, have distanced themselves from Nokia during the software transition.

Phone operators, which sell the vast majority of phones, abandoned Nokia phones bearing its in-house operating system, Symbian, during the eight-month transition.

Shares of Nokia rose 1 percent in European trading to €4.88 following the announcement. One investor said that Nokia and Microsoft must overcome skepticism surrounding the success of the venture, which faces an uphil battle to catch Apple and Google.

“I have seen no evidence that Nokia and Microsoft are making a game of it — yet,” said Jeffrey P. Davis, the chief investment officer at Lee Munder Capital Group, an investment manager in Boston. “Android is winning the mind space on the consumer front. The business world will probably follow.”

But many network operators are hoping the alliance will be successful, giving them more leverage to negotiate lower purchase prices from Apple and the makers of Google’s Android handsets. Critical for the venture will be enlisting more handset makers besides Nokia to make Windows smartphones, said Francisco Jeronimo, an analyst with IDC in London.

“Without that, the Nokia-Microsoft handsets will just be a single option or two for consumers, not enough to elevate the brand into the mainstream of consciousness,” Mr. Jeronimo said.

Samsung and HTC, a Taiwanese handset maker, produce a limited number of Microsoft phones, preferring to either use their own operating systems or marry Google’s Android operating system to their hardware. That in part is because the companies must pay royalty fees to Microsoft.

Neil Mawston, an analyst at Strategy Analytics in Milton Keynes, England, estimated that Nokia was paying $15 to Microsoft for each Windows smartphone it produces, less than the estimated $20 other handset makers are paying. The new Windows phone lineup, he said, has the potential to help restore Nokia’s fortunes in the smartphone market.

“One thing I have learned in this business is to never say never,” Mr. Mawston said.

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