Earlier this month, the Nokia (NOK) Lumia 900, running Windows Phone software, started selling in the U.S. This is another attempt by Microsoft (MSFT) to capture market share in the smartphone market. Previous attempts have failed. Notwithstanding, the Metro OS is being hyped as a legitimate challenger to Apple and Google (GOOG) OS-based smartphones.
AT&T (T) which is also selling the iPhone at a loss, introduced the Nokia Lumia 900. The Lumia 900 retails for $99.99 with a two year contract and $449.99 without the agreement. Unless AT&T is paying Nokia less than $450 for the Lumia 900, it is selling the smartphone at a $350 loss. That is roughly the same loss AT&T faces on each sale of an iPhone with a new two-year contract. The Lumia does little-to-nothing to improve margins at AT&T.
It is unlikely that Verizon will cut subsidies on sales of smartphones and risk losing customers to rival services. That being said, the move by Verizon to Metro OS-based smartphones does little-to-nothing to improve Verizon's margins.
Additionally, the Lumia 900 is suppose to be the phone that helps save Nokia. The Lumia 900 faces competition from Sumsung's (GM:SSNLF) Focus S and HTC's Titan II; both run the Microsoft mobile operating system. Verizon already offers the Metro-based HTC Trophy. Brand loyalty to Samsung and HTC (GM:HTCXF) will hurt Nokia's sales of its Lumia smartphone. Additionally, AT&T subscribers can buy a Metro OS-based Samsung smartphone for free.
Apple is still going to be able to compete on brand loyalty, product cost and product quality. The move to add Metro-based smartphones may have minimal impact on Apple's sales. Apple's customers tend to be loyal. Metro is probably a bigger threat to Google's Android OS. Apple will unveil its new iPhone model later in the year and the future of the iPhone hinges on the improvements that have been made to the product line.
The biggest winner here is Microsoft (as usual) as it sells its software to HTC, Samsung & Nokia. LG should also join the list of firms making Metro-based smartphones.
We still believe Nokia is a company on the edge of extinction as it doesn't make a Android OS-based smartphone, the firm isn't well diversified, it isn't competitive in the world's largest market (the U.S.) and sales of its new phone are struggling in its core market, Europe.
Simply put, bullish Microsoft, bearish Nokia. Additionally, bullish Verizon and AT&T because they dominate the wireless phone industry in the U.S. and they pay solid dividends.