Double Down or Bust
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Microsoft (NASDAQ: MSFT) has a lot riding on the success of Windows 8. The launch of 8 will bring a unified operating OS to tablets, laptops, desktops, and smartphones. Microsoft teased a look at the Surface on June 18th and the following day the stock popped 2.8%. The masses are slowly approving of the new operating system and the hype continues to grow. Microsoft has a lot to prove and the preliminary vibe on the street is that Windows 8 delivers. Even this article is written using a preview version of new the Word WebApp and using SkyDrive (read: Microsoft’s cloud).
The success of Windows 8 will require that all products be at the top of their game. Desktops and laptops will be taken care of from the likes of Dell, HP, and Asus. Microsoft’s Surface tablet has already delivered a high bar for their line of tablets. The laggard of the 8 product line is Windows Phone. Windows Phone received praises from consumers and reviewers, but was only able to capture 3.8% of the smartphone market. Google (NASDAQ: GOOG) and Apple (NASDAQ: AAPL) barely flinched with their 51.6% and 32.4% of smartphone market share, respectively.
Microsoft’s partnership with Nokia (NYSE: NOK) was seen as the shot-in-the-arm that the Windows Phone needed. The Lumia 900 launched in March 2012 and, again, was met with praise from the reviewers. But even with only a $99 price tag only 300,000 units were sold! Nokia has taken a vicious beating, dropping 56% since the launch of the Lumia 900, and Microsoft’s announcement that current Windows Phones would be unable to upgrade to the Windows 8 OS has, in one fell swoop, made the Lumia 900 an outdated phone for the rest of 2012.
The cards in Nokia’s hand
Despite taking a vicious beating, Nokia still has fight in them. Before the Lumia 900 there was the Lumia 610, 710 and 800 which were able to sell a little over 1 million Windows Phones. Unlike the falling Blackberry smartphone, the Lumia 900 was able to garner attention from consumers and techies alike. While the attention did not translate into sales for the Lumia 900, in the long run, Nokia has flexed its technology arm and impressed the world. Delivering a $99 quality smartphone is not an easy feat and does offer a differentiating factor against other smart phone manufacturers. The strategy of “quality for cheap” smartphone has the potential to pay off in the long-term.
The other card up Nokia’s sleeve is the close partnership with Microsoft. The partnership allows Nokia the ability to trend off the beaten-path when it comes to the features of the phone. Currently, Nokia has not leveraged this to their favor, but except this to change with the launch of the Windows 8 OS in the fall.
Finally, Nokia has laid the foundation for penetrating into the Chinese’s smartphone market. In April 2012 Nokia launched into the Chinese market; quickly selling 4 million units. This is just the tip of the iceberg. Nokia had tremendous success in China before, with the Symbian line of smartphones, and the brand recognition will undoubtedly help Nokia secure a chunk of the Chinese smartphone market.
The future outlook
Nokia does have an uphill battle left but still has plenty of fight left in them. It is not easy for consumers in America to switch phones due to one or two year contracts. This makes the success of Nokia an impossible short-term play but having a consistent product line of success will eventually pay off for Nokia.
SpokenLegacy has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, Microsoft, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.