Delta Air Lines (NYSE:DAL) announced a deal on Friday to equip every single flight attendant with a Nokia (NYSE:NOK) Lumia 820 running the Microsoft (NASDAQ:MSFT) Windows Phone operating system (OS). I was bursting with excitement, expecting Nokia's stock to fly higher on this news, but it barely reacted. The reason is amazingly none of the sell-side picked up on this news, and neither did any of the major financial news providers such as Bloomberg. Unsurprisingly, Nokia did not make an announcement so the sell-side in Europe, which is notoriously quiet on a lazy Friday afternoon in August, just did not pick up this important catalyst. Maybe the Street was too focused on trying to interpret the significance of Ballmer leaving Microsoft. Either way this news is hugely significant and a major positive indicator of the potential of the Microsoft Windows Phone OS as delivered by Nokia's Lumia phones for enterprise customers.
This news needs to be interpreted to explain its significance as no doubt a skeptical sell-side will focus on the absolute volume of Lumia phones sold in this deal rather than recognizing the significance of the adoption.
Microsoft as part of business DNA
The Delta deal is a nice fillip at 19,000 units of the Lumia 820, a slightly older model. The catalyst is not about the absolute number as it is a small part of the pie when considering the potential for Lumia to sell over 10m units in Q3. The 10m is my forecast and not the Street's, where we have seen forecasts range from 6.5m to 8m. Consider the following in terms of the potential of the Microsoft Windows Phone OS to penetrate the corporate world. Delta is the tip of the iceberg.
1) Microsoft has a virtual monopoly in terms of the operating system businesses use globally. This link shows Microsoft's operating system runs over 90% of all computers globally. That means Microsoft is part of the DNA of virtually every business.
2) Microsoft has a credible and maturing mobility solution through the Windows Phone OS as delivered by the cutting edge hardware of the Nokia Lumia range. The scope to cross-sell enterprises on the whole ecosystem is mind-boggling, especially as further software updates enhance the Windows Phone OS. Microsoft can approach virtually every business globally and pitch their mobility solution. It is not hard to see the sales pitch:
'You use our Windows operating system for your business computing needs, why not use our Windows Phone OS as synced perfectly with your businesses operating system?' It is a question every CTO will have to at least ponder.
3) Businesses are exploring new ways to use mobility solutions to enhance productivity. This Delta deal is a great example of this. Delta's flight attendants using smartphones to manage customers in-flight is a first. It will open up ways to enhance productivity and customer service from faster payment processing to a more personal in-flight service. I'm sure soon every Delta flight attendant will be referring to each frequent flier by name, helping to build customer loyalty.
The Delta deal shows how smartphones will increasingly be used by enterprise customers in ways not thought of previously to enhance productivity. The other potential uses are limitless, from being used by waiters to fashion buyers.
This productivity benefit to business from smartphone adoption will be a major boon for the Microsoft - Nokia smartphone franchise. Windows Phone OS offers the huge advantage of enabling the mobility side of a particular business to be synced perfectly into the operating system already being used by the same business.
3) Following the above logic, it is evident that Microsoft and Nokia are poised to make huge strides into providing enterprises with mobility solutions. Not just in terms of replacing current mobility solutions used by enterprise customers, but also in terms of helping business customers find totally new ways to use mobility to enhance productivity, all the while offering a mobility solution that integrates into most enterprise customers' current operating system.
Huge potential for enterprise adoption
The above reasoning explains why this Delta deal is so powerful. It is a major tick in the box for the Microsoft-Nokia mobility tie up. It highlights the very real potential of driving their mobility solution into businesses, given that Microsoft is already part of the DNA of virtually every business globally.
Delta is the first major realization of this potential, with the Windows Phone mobility solution being used to enhance business productivity in a totally new way. The fact that every flight attendant globally on Delta will now be using a Nokia Lumia phone powered by the Windows Phone OS is quite a success for a tie-up the stock market is hugely skeptical of. Also the fact that the 165m passengers Delta flies globally will see Delta using a Nokia Lumia is helpful and free marketing that will help further embed the Nokia Lumia brand with customers.
There is a very strong negative bias to Nokia driven by over five years of under-performance. The sell-side is stuck in their bearish mentality, failing to recognize any of the good news that is happening at Nokia. Any good news is spun as a negative. I have no doubt if Apple had announced that a major carrier was switching each and every one of their flight attendants to using the iPhone, the stock would have been up over 5% as analysts waxed lyrical about the potential in the enterprise segment.
I think in terms of this Delta news announced on Friday, it just literally has not been picked up in Europe. I spoke to several contacts on the buy and sell side in London late on Friday afternoon, and they confirmed that no one had mentioned this news. As the market focuses and realizes the significance of this Delta announcement, I expect Nokia to start flying higher. For a smartphone business that is given a negative valuation by the stock market, convincing a major US airlines to equip their entire flight staff with a Nokia Lumia is not a bad achievement, eh?
Disclosure: I am long NOK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.