Nokia Oyj (NOK1V) will reenter the U.S. smartphone market in early 2012 with the introduction of devices running Microsoft Corp. (MSFT)’s Windows Phone for multiple U.S. carriers, Chief Executive Officer Stephen Elop said.
Elop, 47, last week unveiled Nokia’s first Windows Phone models after the Espoo, Finland-based company struggled to sell smartphones based on its own 10-year-old software. Nokia has lost more than 60 billion euros ($85 billion) in market value since Apple Inc. introduced the iPhone in 2007. The company intends to widen its range from the 420-euro Lumia 800 and 270- euro Lumia 710 introduced last week with both cheaper and more expensive devices, Elop said.
“Our plans are to be very competitive and to go head-on with the appropriate devices at the appropriate price points,” Elop said. “We know we need to get volume moving and we need from that to develop economies of scale. And then as we do more and more differentiation, we expand gross margin.”
Elop didn’t exclude entering the tablet-computer market, though he said the company hasn’t announced plans to do so. Microsoft’s forthcoming Windows 8, which will have a tiled user interface with dynamic updates similar to Windows Phone, is like a “supercharged” version for tablets, he said.
“There’s a new tablet opportunity coming,” he said. “We see the opportunity. Unquestionably, that will change the dynamics” of the tablet market.
Windows Phone may be Nokia’s last chance to claw back share in the fast expanding smartphone market from Apple and handset makers such as Samsung Electronics Co. that use Google Inc. (GOOG)’s Android system. Nokia’s homegrown Symbian line has suffered from an outdated, hard-to-use interface and the company was slow to introduce faster processors, bigger device memories and sensitive touch screens.
Nokia has fallen to No. 3 in the smartphone market, behind Samsung and Apple, according to market researcher Strategy Analytics. Nokia is still the largest maker of mobile phones by units, including low-end phones that account for about half its handset revenue.
Elop, a former Microsoft executive, said the Windows Phone line will give users access to more of the popular applications that have eluded Nokia with its older systems.
“There’s a small number of applications, in the hundreds, that are must haves, and we’ll do whatever is necessary to make sure those are on our platform,” he said. “The popular apps, the high end of the curve, we’ll be very focused on. It’s not a race of total quantity. There’s only so many flashlight apps that you need for a smartphone.”
Some apps will be better than those on competing devices, such as the ESPN sports information app that will be preloaded on the first Lumias and was produced in partnership with Nokia, he said. Nokia will also focus on working with local developers on filling the store with content and programs for each market.
Nokia has tumbled 43 percent in Helsinki trading since Feb. 11, when Elop announced the partnership with Microsoft and said he would phase out Symbian. Investors had been skeptical Nokia would be able to deliver a competitive phone in time for the holiday season. The shares fell 5.2 percent to 4.62 euros at the close in Helsinki amid a broader market decline.
Lumia vs. IPhone
The Lumia 800 flagship phone has a higher-resolution camera than Samsung’s Galaxy Nexus and a lower price tag than Apple Inc. (AAPL)’s iPhone 4S. The device will start selling in Europe this month at the price of 420 euros, excluding taxes and without a phone contract.
Apple last month started selling the iPhone 4S, moving more than 4 million units in the first three days after it was introduced at 629 euros for the cheapest unlocked model in Germany and France. Samsung announced the Galaxy Nexus last month without giving a price.
Apple and Google helped cut Nokia’s smartphone market share to 20.9 percent in the second quarter from 50.8 percent when the iPhone came out in 2007, according to Gartner Inc. estimates.
To differentiate the Lumia phones, Nokia’s marketing campaign will use the distinctive Windows Phone interface with its big, colorful tiles that contrast with the smaller icons of the Apple and Android interfaces as a main selling point.
Unlike an Apple or Google device, a Windows phone doesn’t present users with rows of icons representing apps. Instead, the home screen consists of a layout of tiles that represent the phone’s key functions and as well as entities that are important to the user, such as apps and friend groups. The tiles update themselves with the latest information, such as incoming e-mail and next appointments.
Second to Android?
The company intends to differentiate itself with content as well as hardware, said Elop, pointing to the inclusion of free turn-by-turn driving directions with maps on the Lumia. The driving application is built on technology Nokia acquired three years ago with its purchase of Navteq Corp., whose camera- equipped cars drive the world building electronic atlases. Future innovations could also entail acquisitions, he said.
Elop has said that marketing spending on the Lumia handset series, including that by phone companies and retailers, will triple compared with prior product launches. Nokia lined up 31 phone companies including Vodafone Group Plc (VOD) for the initial sales of the Lumia 800 in six European countries in the next few weeks. Elop today declined to name the first U.S. carriers.
The Lumia 800 will also come to Russia and some Asian markets by yearend, while the lower-priced Lumia 710 will start in those markets in the same period, Nokia said on Oct. 26.
The smartphone market may be big enough to help Nokia win over new customers. Smartphone sales by volume will increase 40 percent next year to 645 million units, Gartner says. Windows Phone may become the No. 2 smartphone operating system in 2015, with a market share of 21 percent, according to the researcher.
To contact the reporter on this story: Diana ben-Aaron in Helsinki at email@example.com