One of the biggest disappointments in Nokia's (NOK) recent earnings call was the drop in sales of its Asha line of what I like to call proto-smartphones. The original Ashas were not smartphones in any strict sense. They were more like touch-enabled, dual-SIM feature phones built for emerging markets with at best 2G data connections. Yesterday at an event in New Delhi, Nokia CEO Stephen Elop and friends presented the new Asha 501. We'll get to the details in a minute, but, suffice it to say that Nokia has hit a home run with this phone equivalent to the one they hit with the Lumia 920 last September and the Lumia 520, which is already the most popular Windows Phone in India.
Say what you want about Nokia, they understand where their future lies and it is where the past has been - the emerging markets of Asia, South America and Africa. The Asha 501 represents a whole new level of sophistication and purpose-built functionality for a non-smartphone. I know this sounds a bit like a marketing pitch, but it's not. The phone is literally a perfectly designed device for its intended markets with India leading the way.
Nokia has taken the Asha touch line, like the 311, and turned it into a full gesture-driven interface that they are calling Swipe. It fits. You swipe your finger to do everything on the phone. Nokia has updated S-40 with technology from its acquisition of Smarterphone. Honestly, you have to watch the press event to believe smoothness and performance of the device. It is socially-driven and everything is one swipe away from being accessed. It's pretty cool. I like Windows Phone for pretty much the same reason along with the data density of the live tiles but Nokia's Fast Lane approach to getting around the limitations of S-40's interface is very slick.
When you match that with Nokia's data compression - claims of a 90% reduction in data usage - and its browser it is no wonder that Asha has been extremely popular in places like India. Elop is right when he says that 80% of the world is on a 2G network and because of that regular web browsing is all but impossible.
Nokia is serious about creating revenue streams that exist outside of just selling cheap hardware to the masses. If the Asha 501 is as successful as I think it will be Nokia will be able to attract developers to the platform itself as well as its ad network that it is launching with this device as well. It almost feels like guerrilla warfare here.
This is all good, but none of this is the home run. At just $50 less than the Lumia 520 running Microsoft's (MSFT) Windows Phone 8 is the Asha that good a value, really? The answer is a yes, because each 501 will come with the ability to access Facebook (FB) for free-without a separate data plan. In effect, the 501 comes with an unlimited data plan for accessing Facebook. Nokia and Facebook have gotten more than 60 carriers worldwide to sign onto this program.
This is the game-changer folks. Pure and simple.
Facebook drives smartphone sales. It drives the sale of data plans the world over. Selling a $99 smartphone - and looking at it in action the Asha 501 is a smartphone - with Facebook access is going to drive a lot of sales.
For Elop to pull this one out just a couple of days after getting berated by angry shareholders is almost too ironic for words. They asked him to go a different route and here it is. Continue to evolve older technology into an entry-level, but richly-featured phone that drives a huge value proposition for potentially hundreds of millions of people. It is obvious that Nokia's long-term strategy is to build a content distribution network across two radically different platforms: Windows and Asha. Asha is purpose-built for low-cost devices. Windows is more robust. Both are very capable on lesser hardware. This drives sales in places with low disposable income and/or low bandwidth.
If anyone is doubting Tim Cook's decision to not go after India with Apple's (AAPL) iPhone, you only have to look at what Nokia is doing with Asha and realize that there is simply no way for them to compete in that space at the margins they have grown accustomed to and make it worth their while. I still think it's a mistake.
This 501 and the new 500 series is probably a quarter late, however, as feature phone sales have fallen off the same cliff that laptop and desktop sales have and Nokia has lost some momentum because of this allowing Samsung (OTC:SSNLF) to slip in and grab customers. Nokia had to push Asha farther towards blurring the lines between the two product types. If it hadn't I would be writing a much differently-toned article today. Because, as encouraging as the growth of Windows Phone is for Nokia and Microsoft, for Nokia that growth is not fast enough to sustain the firm. Nokia needs Asha to sell tens of millions of units and those are the expectations for the platform.
If that occurs, the whole smartphone industry as we currently understand changes completely.
Additional disclosure: My wife now has a Lumia 810... she loves it.