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Nokia Offers Cheaper Windows Phone to Nip Android Expansion

Nokia Oyj (NOK1V), the world’s third-largest smartphone maker by shipments, will sell a Windows Phone priced at 189 euros ($254) in the second quarter to capture first-time users against similar devices powered by Google Inc.’s Android.

The Lumia 610 will be 30 percent less expensive than Nokia’s current cheapest smartphone running Microsoft’s Corp.’s Windows platform. The device will be targeted at young people to hook them to the company’s new platform. Nokia also announced a high-resolution camera phone as it returned to the Mobile World Congress in Barcelona, Europe’s biggest wireless show, with its first product introduction in three years.

Nokia Chief Executive Officer Stephen Elop won good reviews for the first two Lumia phones using the Microsoft platform, which sold “well over 1 million” units, he said Jan. 26. Nokia’s shares have fallen about 10 percent since it unveiled those handsets Oct. 26 as consumers continued to bypass Windows Phones in favor of Android handsets costing as little as $100 and Apple Inc. (AAPL)’s iPhone, which broadened its range with discounted older devices.

“Nokia has come back with a vengeance,” Elop said in an interview with Bloomberg Television today. “We’re absolutely mobbed today because of the range of product and services” the company is showing at the Mobile World Congress.

Bigger Ecosystem

Microsoft has adapted Windows Phone software so that it requires half as much memory and runs the cheaper 7X27A chip from Qualcomm Inc. That should help manufacturers cut their costs.

“The new Nokia Lumia 610 is the perfect introduction of Windows to a younger audience,” said Jo Harlow, Nokia’s smartphones chief. “We are now able to cover a range of needs and a range of price points.”

The price of the Lumia 610 “makes it very competitive with the low-end Android devices,” said Carolina Milanesi, a research vice president at Gartner Inc. The handset will be attractive to operators as it will require very little subsidy, she said. “You build momentum, you build volume and then you build interest in the ecosystem.”

The Lumia will run on the updated version of Microsoft’s software, Windows Phone 7.5, known as Mango, which will be based on cheaper hardware, according to the announcement.

“Nokia is starting to deliver on Elop’s promise to bring down the price points and enlarge the Windows Phone ecosystem,” said Martin Garner, a London-based analyst at CCS Insight. “It’s still too early to proclaim success, the volumes are not there, but he is executing and doing it at the right sort of speed.”

Emerging Markets

The manufacturer also said that its high-end Lumia 900 device, which will first go on sale in the U.S. with operator AT&T Inc., won’t be made available on any other fourth- generation network except in Canada. The handset, which will be sold in the second quarter and costs 480 euros, will run on a form of third-generation technology called HSPA+.

Nokia, based in Espoo, Finland, also introduced three phones for its Asha line, sold primarily in emerging markets. The company got about 46 percent of its sales last year from these handsets and other low-end phones, which lag behind smartphones in processing speed and applications such as video calling and corporate e-mail. The company’s new camera-phone, the 808 Pure View, will have a 41 megapixel sensor, alongside optics jointly developed with Carl Zeiss AG.

Smartphone Growth

“We are demonstrating the actions necessary to improve the fortunes of Nokia, very deliberately recognizing challenges, changing strategy and then executing very aggressively against that,” Elop said. “That’s the path you’ll see us continue to execute day in and day out.”

Smartphone sales may grow 39 percent this year from 472 million units, according to researcher Gartner. Android and the iPhone together accounted for almost three quarters of smartphone sales last quarter, while Nokia’s share was 12 percent, Gartner said. A billion people may use smartphones by 2016, Forrester Research said in a report this month.

Microsoft Corp. (MSFT) said it plans to bring its Windows Phone software to 23 new countries and put the operating system on less expensive smartphones. Microsoft will kick off the expansion by opening mobile-application stores in China, Thailand, Venezuela and the 20 other nations by the end of the month, with phones arriving around the same time. That will bring the total number of markets Microsoft serves to 63, letting it target 60 percent more buyers.

Value Drop

Nokia has lost more than 60 billion euros in market value since Apple introduced the iPhone in 2007, including a 14 percent drop on Feb. 14, 2011, the day Elop announced that Nokia would embrace Windows Phone and taper off its 10-year-old Symbian product line.

“Investor confidence will be built as we execute our strategy,” Elop said.

Nokia will need the U.S. market for brand credibility and emerging markets for volume. It’s preparing to sell the Lumia 900 handset with AT&T while the Lumia 710 is in shops including Wal-Mart Stores Inc. Nokia will offer Lumias in China and Latin America by July, Elop said Jan. 26. Last year its handset revenues fell in all regions except the Middle East and Africa and Latin America. The Lumia 710 costs 270 euros.

The company introduced the Communicator, one of the first handsets to surf the Internet, in 1996. Its N8 Symbian smartphone, introduced in 2010, had a 12-megapixel camera.

To contact the reporters on this story: Jonathan Browning in Barcelona via jbrowning9@bloomberg.net; Cornelius Rahn in Barcelona via crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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