Will Nokia’s first Windows Phones deliver?

Nokia has unveiled their first two Windows Phone powered devices, the Nokia Lumia 800 and the Nokia Lumia 710, running the latest version of Microsoft’s Operating System, Windows Phone 7.5 Mango.

The Nokia Lumia 800 features a 3.7″ AMOLED display, 1.4 GHz processor, 8 megapixels Carl Zeiss camera with dedicated button, 16GHz imbedded memory and a 1450MAh battery. The Nokia Lumia 710 features a 3.7″ Display, 1.4 GHz processor, 5 megapixels Carl Zeiss camera with dedicated button and 8 GHz imbedded memory.

Stephen Elop’s performance is all about execution

Nokia has come a long way over the last twelve months. Stephen Elop joined the company in September 2010 and a few months later announced an “180-degrees” shift on its strategy, unveiling an alliance with Microsoft to embrace Windows Phones as the main platform for Nokia smartphones. In several occasions throughout the year Stephen Elop said that Nokia was on track to deliver the first Windows Phone by the end of 2011.

In 13 months, Stephen Elop stepped in as CEO of the biggest phone maker in the world, defined a new strategy and a new paradigm for Nokia, executed it and over exceeded expectations by delivering not only one, but two new Windows Devices.

Meanwhile Nokia also improved Symbian and launched Symbian Belle, a significant improvement on the user experience and the user interface. Nokia also launched Dual-SIM devices and focused on a proper portfolio for emerging markets. Nokia seems to have now what lacked for years, speed to adjust to the market pace!

Are the devices competitive enough and will they drive strong volumes?

The two devices launched address both the premium and the mid-tier segments, another big surprise today. The Nokia Lumia 800 aims to compete with the likes of the Apple’s iPhone 4S, the Samsung Galaxy S II or the HTC Titan or HTC Sensation.

This is a slim and sleek, well designed phone, featuring the best in class camera. Positioned to the high-end segment it has some strong key selling points, although the popularity of Android and the new iPhone 4S will not make Lumia 800 a volume driver among the premium devices. The Nokia Lumia 710 will surprisingly address the mid-tier segment, which was not expected to happen until the second quarter 2012.

This is the most affordable 1.4 GHz processor device, a mid price-tier handset with high-end specs. These devices will be available in selected markets only in Europe, clearly postponing to 2012 the US market, one of the biggest targets for Nokia.

Despite the speed of development, the quality of the devices and the competitive pricing, Nokia will not be able to drive significant volumes in the coming months. The reason for that is not linked to the devices themselves, but to the low Windows Phone OS penetration and awareness among consumers. Microsoft’s OS represented 2% of total smartphone shipments by the end of the second quarter 2011, the lowest share ever.

In the coming weeks, these devices will share the store shelves among several popular Android devices, the new iPhone 4S and even some new Blackberry 7 devices. Consumers don’t know the Windows Phone user interface or its advantages. They have never tried a Windows Phone before and quite likely don’t know anyone who has a Windows Phone.

Although this will change over time. Mobile operators will launch Nokia devices and are already pushing other phone makers to deliver Windows Phones, as they want to make Microsoft’s OS a strong contender to the iOS and Android dominance. Over the next quarters we will see several devices from different manufacturers being launched and subsidised by mobile operators.

Ironically Windows Phones from Samsung and HTC will help Nokia. A diversity of different devices from different vendors will raise awareness to the operating system, much needed by Nokia. IDC estimates that by 2012, Windows Phones will be able to grow its market share to 11% and by 2015 it will become the second biggest smartphone operating system in the world with 20% market share, behind Android and ahead of iOS. Nokia is now well positioned to lead the Windows Phones growth.

What does Nokia need to do to succeed?

As much as Nokia needs Samsung, HTC, LG, Huawei and other vendors to help Windows Phones to grow, the company also needs to differentiate their phones from competitors. Microsoft does not allow the user interface to be changed, which makes differentiation harder to achieve. Nokia will need to leverage its hardware expertise, but the differentiation will come from their unique services that other vendors cannot easily match.

For instance, the Lumia devices will run Nokia Maps. This service is the most widely available free mobile navigation service, with unmatched number of languages and country support compared to any other services available today. The Lumia 800 comes with an upgraded user-interface for in-car navigation, mirroring the experience of dedicated Personal Navigation Devices (PND).

Nokia also needs to take advantage of their expertise on the enterprise segment, an area they know well and were strong with Symbian in the past. Lastly the investment that Nokia will do at the point of sale will be crucial. Marketing campaigns, sales people training and sales incentives will be key for Nokia Lumia devices to be pushed to end-users.

Will these devices save Nokia?

This is today’s bottom question. Will these devices be enough to reverse Nokia’s current performance? Nokia has been struggling in the smartphone segment since 2007. It will take a lot more than just a couple of phones to bring Nokia back, but what we are seeing today is an excellent first step and Nokia has shown that can change its culture, readapt and refocus on growth, by delivering devices that combine the best of hardware with unique services at the right price and at the right time. We foresee a brighter future to Nokia now compared to a year ago.

Francisco Jeronimo joined IDC in June 2008 as research manager for European Mobile Devices. Based in London, he is primarily responsible for research that covers mobile handset trends across Europe. He is also responsible for the European Quarterly Mobile Phone Tracker program. Francisco has been working in the telecom industry for 10 years in countries such as Japan, Finland, and Portugal. Before joining IDC, Jeronimo was responsible for the mobile devices business of LG in Portugal, in particular developing the open market channel and the business with Vodafone. In Portugal, he worked with all the mobile operators and managed the distribution channel of the second-biggest wholesaler. He launched a mobile software development company and did project management and consultancy in mobility for several companies in different industries. Before that, in 1998, he started working for Nokia R&D Center in Japan and then in Finland. He has a master's degree in management from Oporto University in Portugal and is a postgraduate in sales management from Lisbon University with a major in telecoms. He is fluent in English, Spanish, and Portuguese.